Diamond Ventures, a venture capital firm, is suing the Small Business Administration (SBA) for racial discrimination. The $50 million lawsuit alleges that the SBA rejected Diamond’s application to join their Small Business Investment Company (SBIC) program. SBIC firms are licensed to provide equity investment and loans to small firms, backed by government guarantees.
While there has been a long history in African-American entrepreneurship that the SBA is our friend. I’ll go as far as to say that it has frankly been force-feed to our communities as the first stop when striking out on our own in search of the great American Dream. When our communities are fed incorrect information such as this it’s not surprising that only 39% of African-American entrepreneurs survive past four years, data taken directly from the SBA’s own research.
The Chicago Tribune expanded on these findings discovering during an interview with the Kauffman Foundations that while African-Americans are 50% more likely to start a business than whites they still face a higher level of difficulty trying to maintain funding, often resorting to more expensive ways of financing businesses (mortgage refinances, credit card debt, etc.) despite having smaller personal financial wealth.