Companies providing grants for Black entrepreneurs faced uncertainty and loss of financial support due to lawsuits filed challenging the premise of these grant programs. However, Hello Alice is standing strong, closing its Series C funding round. Its resilience is also demonstrated by the U.S. Equal Employment Opportunity Commission (EEOC) and the Southern Poverty Law Center (SPLC) amicus brief filings in the court cases.
Hello Alice uses a proven effective model by Community Development Financial Institutions (CDFIs). Its success underscores the critical role of pairing grants with know-how to fuel economic growth among underestimated communities, such as Black entrepreneurs.
While some may oppose efforts to bridge the wealth gap for entrepreneurs, resorting to legal roadblocks ultimately hinders the economy’s growth, job creation, and the development of innovative products that meet the needs of emerging markets. These tactics—championed by a vocal minority—run counter to the interests of the majority, who benefit from a more inclusive and thriving economy.
Activist Legal Organizations Challenge Racial Equity Efforts
America First Legal (AFL), led by Stephen Miller, is suing Hello Alice, and the American Alliance for Equal Rights (AAER), led by Edward Blum, is suing Fearless Fund. Both lawsuits challenge efforts to promote racial equity by providing grants to Black entrepreneurs. The lawsuits hinge on Section 1981 of the Civil Rights Act of 1866, a post-Civil War law enacted to prevent discrimination against formerly enslaved people in contracts.
Winning the lawsuits may not be the point. According to Bloomberg News, Blum stated that investor pullback from the Fearless Fund was unsurprising. In a statement, Blum argued, “No investor wants to participate in a business endeavor that the courts are highly likely to find discriminatory and illegal.”
Hello Alice and Fearless Fund initially experienced an immediate retreat among investors and grant program sponsors, and launched expensive legal defenses. These diverted dollars would have gone to support financial inclusion efforts.
However, months later, Hello Alice was able to close its Series C funding round with QED Investors, Mastercard, Backstage Capital, Guy Fieri, Golden Seeds, Harbert Growth Partners Fund, How Women Invest I, Lovell Limited Partnership, Tyler “Ninja” and Jessica Blevins, Tamera Mowry, and Adam Housley.
This funding will support Hello Alice’s expansion of financing offerings and AI-driven financial health tools for small businesses. The fintech platform serves 1.5 million small business owners and has provided over $40 million in grant funding.
In February, Though not a party to the lawsuit, the EEOC—a government agency that enforces laws making discrimination illegal in the workplace—weighed in with an amicus brief supporting Hello Alice. The EEOC argues that its guidelines allow for voluntary affirmative action programs in private investments and that a recent Supreme Court decision on affirmative action doesn’t apply here.
“It [the amicus brief] is a major legitimiser of how critical this case is,” said Elizabeth Gore, president and co-founder of Hello Alice. “Sixty-four percent of net new jobs in 2024 came from small businesses,” said Gore. “If we limit the capability of small businesses to get funding, that is a big danger [for the economy].”
Late last year, the Lawyers’ Committee for Civil Rights Under Law and the SPLC filed the first amicus brief supporting Hello Alice.
Damage has already been done. Defending these lawsuits diverts millions from initiatives promoting financial inclusion.
Hello Alice and CDFIs: Supporting Inclusive Entrepreneurship
Hello Alice’s approach to supporting inclusive entrepreneurship is similar to that of Community Development Financial Institutions (CDFIs). Both provide access to grants and affordable financing, with expertise to ensure business success. CDFIs’ assistance comes from humans, and Hello Alice’s comes from AI-driven financial health tools. Like CDFIs, Hello Alice provides grants to all small businesses but also tailors some to groups with wide wealth gaps, such as Black, Latino, Native, LGBTQ+, rural, urban, and veteran communities. These communities face disparities that make starting and growing successful businesses harder.
Grants provide the initial funding to overcome obstacles and avoid predatory lenders. Know-how equips them with the knowledge to manage finances effectively, build creditworthiness, and navigate future funding opportunities. This combined approach helps small businesses create a strong foundation for sustainable growth and economic empowerment.
Over the past three decades, CDFIs have proven the formula works.
“Small businesses are a critical component of our economy,” said Michael Pugh, president and CEO of Local Initiative Support Corporation (LISC). It is the largest U.S. nonprofit Community Development Financial Institution (CDFI), connecting capital and know-how to historically underserved communities. “It’s imperative that we think about how we drive economic growth and employment.”
Black women-owned businesses are one of the fastest-growing segments. “The skill set and the idea of launching a business may be very high, but they are under-resourced,” said Pugh.
Decades of discriminatory policies, including denied loans, unfair wages, and redlining in housing, have significantly hindered Black families from building wealth. Black women, often the heads of households and facing a persistent wage gap, struggle even further. Limited access to capital and inherited wealth further impedes their ability to save and invest, perpetuating the cycle of economic inequality.
To add insult to injury, a 2021 report by the Federal Reserve Banks revealed another troubling disparity in financing approval rates. Black-owned businesses, even those with low credit risk, were less than half as likely to receive full approval compared to white-owned enterprises with similar creditworthiness.
“What would be helpful [to entrepreneurs] in starting or growing a business is to have some equity in their businesses that is patient [long-term investment, in the form of debt or equity, where sustainable growth is prioritized alongside financial returns] or doesn’t need to be repaid,” said Joyce Klein, director of Business Ownership Initiative at The Aspen Institute. Aspen is committed to realizing a free, just, and equitable society, and BOI drives innovation, scale, and impact within the U.S. microenterprise sector.
Often, Black entrepreneurs do not have the personal wealth or friends and family with wealth to provide this capital.
Unfortunately, without grants or patient capital, Black women entrepreneurs may fall prey to predatory lenders, trapping them in high-interest debt and curbing their ability to grow their businesses. The psychological toll can further discourage them from pursuing entrepreneurial opportunities, widening the racial wealth gap.
“Borrower protections need to be in place to ensure that borrowers understand what they’re getting into, can make good choices, and are not subject to predatory practices,” said Klein. It is critical to be connected to reputable, affordable financing, as Hello Alice and CDFIs do.
“If those businesses are supported how they deserve to be, you would then start to see this broader ecosystem of job growth and improved tax base,” said Pugh.
If Black/African American women-owned businesses achieved the average revenue of men, they would add $1.5 trillion in revenue to the U.S. economy, according to The 2024 Wells Fargo Impact of Women-Owned Businesses: A focus on Black/African American women.*
Do you know where to turn when you need financing for your small business?