Why Is This Health Foundation Backing Entrepreneurs and Small Businesses?

A health foundation in Colorado recently pledged $2.75 million to increase access to microloans and financing to entrepreneurs of color, and low- and middle-income business owners in rural parts of the state.

The program-related investment—which means the nonprofit will eventually return the money to the funder—from Colorado Health Foundation to Accion, a nonprofit lending organization, may have some observers scratching their heads, but a closer look reveals this gift is part of a trend among regional health foundations that has been building for a while. As health equity has become a major focus for regional health foundations, many have turned upstream to address the deeper social and economic problems that contribute to disparities in health outcomes.

“Lack of financial security is a major driver of poor health. In supporting Accion, we are supporting economic stability in rural and low-income Colorado communities and our vision to bring health in reach for all Coloradans,” said Ben Bynum, the foundation’s portfolio director of program related investments. “The bottom line is that when you’re struggling financially, health is further out of reach than anyone desires.”

Accion uses microfinancing and small business loans to level the playing field for people usually denied access to capital. In the case of this grant, loans will go to people of color and low- and middle-income people in rural areas interested in starting or sustaining small businesses. By getting capital into the hands of business owners, the hope is that funds will not only benefit the individual who receives the loan, but also lead to more jobs in the community.

“For the past few years, Accion has made roughly 500 loans per year, putting about $6 million into the market annually at an average of $10,000 per loan. Accion has proven their ability to effectively identify potential borrowers, provide financial coaching, and lend to folks living in rural and low-income communities across Colorado,” said Bynum. “The ability to successfully scale Accion's flexible financing program is an important step in addressing health equity in Colorado.”

It’s worth noting the emphasis on rural communities. Often, large national funders overlook those communities in favor of neighborhoods or people in urban centers where population density makes it easier to reach more people with less effort. However, regional health foundations like this one have stepped up in many rural communities to fund strategic, community-led work.

It’s also notable that the grant emphasizes funding loans for entrepreneurs of color. Minority entrepreneurs are less likely to have access to either small business loans or venture capital, according to a 2010 study put out by the U.S. Department of Commerce Minority Business Development Agency. The 2010 study looked at statistics from earlier in the decade to make its assessment. From 1997 to 2002, minority-owned businesses increased the number of people they employed 4 percent. That number dropped by 7 percent at white-owned businesses over the same period.

By 2002, the number of minority-owned businesses was about 2.5 million lower than it would have been had the number of businesses owned by people of color been on par with their percent of the total population. The study found lack of access to capital to be “most important factor” in limiting the number of minorities who owned businesses and the growth of those operations.

“Increasing the flow of capital for minority-owned businesses must be a national priority to re-energize the U.S. economy and increase competitiveness in the global marketplace,” said David Hinson, the national director at the Minority Business Development Agency—U.S. Department of Commerce. As we’ve reported, a number of funders have lately stepped up to help entrepreneurs of color secure financing—most notably JPMorgan Chase, which has been expanding a fund it created with this goal in 2015.

Meanwhile, growing evidence points to a link between people’s income level and their long-term health. For example, a 2016 Harvard study showed a correlation between income and life expectancy. The study, which examined more 1.4 billion Internal Revenue Service documents, found that poor people died 10 to 15 years sooner than their wealthy peers.

Tom Boyce, a doctor who runs the University of California, San Francisco’s division of developmental medicine, called socioeconomic status “the most powerful predictor of disease, disorder, injury and mortality we have.”

More and more public health nonprofits like the Colorado Health Foundation are looking at upstream factors that determine a person’s health with the hope that tackling root causes can stop health issues before they start. The movement started with the Robert Wood Johnson Foundation about a decade ago, as the Affordable Care Act was making its way through Congress. The foundation turned its attention to childhood obesity and realized better access to healthcare probably wouldn’t solve the problem. Instead, the foundation looked upstream at factors like whether children had safe areas to play or access to healthy, affordable food.

Since then, many regional health foundations have jumped on board, adapting to challenges and solutions in their communities. Many tackle side effects associated with poverty, like food deserts, curtailed access to policymakers and community organizing, or a lack of nearby mental health resources. This gift from the Colorado Health Foundation is somewhat unusual in its direct approach to addressing the finances of poverty directly. But it’s not surprising to see this funder pushing the envelope with it strategies. It’s also broken ground in other areas, such as making a major investment in a 501(c)(4) policy advocacy outfit, Healthier Colorado, a few years ago.

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