A tough economy revives the ‘bootstrapping’ myth. Here’s why it takes more than a good idea to escape poverty

While we are facing a difficult economy, it is common to read the advice of entrepreneurs that now is the perfect opportunity to launch a new business.

The biggest opportunity in a generation,” according to an article in the Forbes. And according to Entrepreneur“Entrepreneurship is about taking that idea and doing something with it. now.”

Statements like this reinforce the popular bootstrap myth: Any hard worker with a great idea can just take a chance and become successful. This is a view that shows a complete ignorance of the experiences of people in poverty, and especially the entrepreneurs who work-or work-their way. save of poverty.

The very qualities and spirit that we admire in business people are everywhere in people of poverty. Resourcefulness, creativity, and urgency are key to survival–from fixing up the house because the landlord won’t respond, to stretching the dollar so the lights stay on and food is on the table, to doing odd jobs to help make ends meet. If hard work and good ideas were all it took to get out of poverty, the world would look a lot different today.

Yet we largely fail to recognize the potential of people in under-resourced communities and invest in their talent. At the same time, we celebrate the exceptions who “did it” as proof that “anyone can do it.” It’s a vicious cycle that reinforces the status quo and makes us ignore the fact that people in poverty often don’t have access to the social and financial capital that all successful entrepreneurs need.

“We need to be honest about the policy decisions we make and what they mean for people’s ability to take the entrepreneurial plunge,” said Mark Herbert, Chief Strategy Officer for Small Business Majority, which includes a network of more than 85,000 small business owners. “Neighborhoods literally have all the talent they need to be successful. It’s just a lack of access to opportunity.”

The main driver of jobs and opportunities in under-resourced communities is Community Development Financial Institutions (CDFIs), and I always wished we were in Stockton when I was mayor.

CDFIs are backed by the US Treasury and are often more in tune with community needs than traditional banks. AmPac Business Capital, a CDFI based in Ontario, California, has made nearly $1 billion in loans, served more than 1,000 businesses, and created or retained more than 4,000 jobs mostly serving non-traditional clients. The organization’s founder and president, Hilda Kennedy, experienced poverty during her childhood in South Central Los Angeles and worked for 12 years in local government and community lending before starting AmPac. In short, he understood.

Kennedy told me that a big reason why low-income entrepreneurs can’t access capital is that most financial institutions never give them a chance to talk about their ideas and situations.

“The 5 c that traditionally guide lending decisions – credit history, capacity, collateral, capital, and conditions – are written to deter some people,” Kennedy said. “People really need the opportunity say their stories with partners like CDFIs to get a fair shot.”

Entrepreneurs are not always the same know with CDFIs. Raising awareness is part of the work we need to do. In addition, states can establish themselves CDFI Funds to provide millions of dollars in leveraged capital so these institutions can expand their reach.

Another hurdle aspiring entrepreneurs face is navigating bureaucracies to get resources. According to Yasmeen Muqtasid, co-owner with her husband, Mychael Darwin, of Omnific Global Marketing, a fashion and design consulting company, a positive lesson from the pandemic is that we see that we can reduce red tape.

“Applications for grants, microloans, and other resources are simplified,” he said,” and we also know that we can giving money directly to people who need it most.”

Muqtasid believes we should use these same lessons to create programs for entrepreneurs who have historically been deprived of resources, such as the man-made wealth gap–generational denial of wealth due to slavery, barring of Social Security and GI benefits, redlining, subprime mortgage targeting, and more–resulted in a unique barrier to entry for Black and Brown entrepreneurs.

“We make policy decisions that create a framework that restricts opportunity from being accessible,” Herbert said. “We can make policy decisions to change it.”

To that, Small Business Majority calls on California to explore a state bank that can invest in small business owners who cannot receive a traditional bank loan, as well as additional technical assistance, microgrants, and funding start for underserved communities, including immigrants and Limited English Proficient (LEP) individuals.

Gov. Gavin Newsom (for whom I am an unpaid consultant) and the California legislature have made critical progress by updating the California Retail Food Code that’s why street vendors get a food vending permit.

Many of these micro-entrepreneurs, many of whom are low-income immigrants and other people of color, struggle to comply with antiquated rules and regulations. Maria Ortiz, owner of Ortiz Ice Cream in San Bernardino, told me that the expensive equipment needed to obtain a permit is nearly impossible for most people to obtain. In fact, according to Monica Robles, President of Association of Businessmen, the result was that many businessmen in the San Bernardino area were arrested, imprisoned, and had their equipment confiscated. Now, these entrepreneurs in 58 counties across the state can run their businesses legally and without fear.

Kennedy and some of his colleagues are also working on structural reform at the federal level to make loan products more accessible. For example, the SBA loan program allows a 10% down payment for commercial real estate, instead of the 25% required by commercial banks.

However, Kennedy said that in California a commercial property is likely to sell for at least $1 million, and coming up with a $100,000 payment is a challenge, especially for entrepreneurs of color.

“Over the last 10 years, less than 10% of these SBA loans have gone to Latino-owned businesses,” he said. “For African American-owned businesses, it’s less than 2%, and even pre-pandemic they were growing at rates of more than 30%.”

Finally, there is a sense that federal, state, and local procurement is not open to competitive bidding from small businesses as they should be if entrepreneurs are to survive and thrive.

“We are experts in our communities. And yet every year we follow the contracts, and they go to people outside our communities,” said Celia Garcia, a workforce development specialist with more of 30 years of experience and the CEO of Job Skills Institute. Jon Burgess, a co-founder of Burgess Brothers, a family food service provider, said, “Small employers do not have the same capacity as large businesses to do large-scale contracting work. We need to create a way for small businesses that don’t have contracts to compete fairly with large businesses that have been sitting on contracts for 10-15 years and have made no breakthroughs.

In every poor community across the country, there is a wealth of talent, desire, and hard work. But there are also persistent, systemic barriers to capital and opportunity that need to be addressed. When we do that, opportunity becomes truly equal, and aspiring entrepreneurs compete on a level playing field.

Michael Tubbs is the founder of End Poverty in California and the senior fellow at the Rosenberg Foundation. He is the special advisor to Gov. Gavin Newsom for economic mobility and opportunity and former mayor of Stockton.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of luck.

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