Fostering Financial Inclusion: Guava

Fostering Financial Inclusion covers forward-thinking companies that are pushing the envelope in financial accessibility. In this series, you can expect to get a look at some of the world’s leading socially responsible technology companies and learn about their initiatives in supporting those who are financially underserved.

Closing the wealth, funding and resources gap

As cautious optimism spreads and a return to “pre-Covid” times is in sight for many, a recent Fortune article explored the hurdles that Black business owners, who have been disproportionately affected by the pandemic, continue to face as they emerge from a time of upheaval. 

The uneven distribution of wealth and systemic exclusion from conventional banking institutions that Black entrepreneurs face has created significant obstacles to building and scaling their businesses. 

The pandemic has further exacerbated common barriers for Black entrepreneurs, tightening access to capital, resources and support. In the Federal Reserve Bank of New York’s 2021 Report on Firms Owned by People of Color, survey findings included that, “Black-owned firms were nearly half as likely as white-owned firms to receive all of the PPP (Paycheck Protection Program) funding they sought and were approximately five times as likely to receive none of the funding they sought.” What’s more, Black business owners were more likely to report that they didn’t apply for a PPP loan because they were unaware of the program. 

Guava aims to serve Black small businesses owners and sole proprietors by offering equitable access to more commercial finance options and products. The platform, now accepting signups prior to its public launch, will also offer its community members the opportunity to connect, learn and partner together with networking functionality. 

Trulioo spoke to Kelly Ifill, Guava founder and CEO, to discuss her journey and mission of empowering Black business owners with both financial and social capital. 

Tell us about what prompted you to create Guava.

That’s a hard question because I feel like I’ve been talking about these issues for a long time. I’m a first-generation American. My family came to the States from the Caribbean.

I think a really common immigrant story is that you start a small business and that’s my family’s experience. I witnessed that growing up, and saw the impact of what it means to be a Black small business owner.

I was running a non-profit with a colleague as a side job which I was really passionate about. We had both worked in venture capital and both intimately understood how difficult the experience was for Black business founders. 

We were doing work that was anchored in the impact of the racial wealth gap on really early-stage founders. The data that we have now proves that it’s nearly impossible for Black and Latinx entrepreneurs. The existence of the racial wealth gap means that pools of capital are not available to Black and Brown founders. 

My perspective was that venture can be this very revolutionary tool, it can catalyze growth and wealth creation for communities who have been otherwise boxed out because the capital isn’t constrained in the same ways that you find in banking. 

In January 2020, I was talking with my non-profit partner about the racial wealth gap. I’m trying to make it make sense in venture capital, it does not, so how do I square this circle? I decided that that was a problem I wanted to work on and spend my time and energy and intellectual capital trying to create solutions for. 

But the financing part of it is extremely inequitable and I wanted to focus on creating any dent in the wealth gap. So that was the genesis and thinking that got me to say “Guava is going to focus on Black-owned small businesses.” Those are the people who have been most acutely harmed by these policies and are not getting access to capital, whether it’s venture or an SBA loan. 

I can bolster the growth of those businesses and help make an individuals’ net worth increase 12-fold, which is what studies show. But also, Black entrepreneurs are more likely to hire Black employees, so you get the domino effect where there’s job creation and value and wealth generated for multiple families and the wider community. That has been and is the North Star for us. 

What are the systemic implications of Black business owners not being able to access financing and conventional banking resources in terms of business scaling and growth, and what are milestones that can’t be reached because of the racial wealth gap?

If we’re looking at the data, there are nearly three million Black-owned small businesses. I always add the caveat that it’s census data, so it often doesn’t account for microbusinesses or people who have businesses on the side in addition to their day jobs. 

But if we take the census data, only 125,000 are employer businesses, meaning the rest are sole proprietors. That means they aren’t employing other people or getting contracts from large companies as suppliers or governments.

There are other qualitative ones: the industries that Black businesses tend to be concentrated in are lower-revenue or lower-profit businesses. A lot of service industry, and that obviously has everything to do with the history of this country, and where Black people were able to build expertise and build their businesses. 

Creating opportunities for them to get capital to grow that service industry business, or to start a manufacturing plant, which we don’t see many Black businesses in, are the things I’m excited for Guava to be able to facilitate. 

How do Guava’s offerings differ from a conventional financial services company? 

There are a few, but the thing I talk about often is the focus on community and financial institutions. The way that our country (and capitalism) works is really individualistic and I think there’s so much value in entrepreneurs strengthening a community as they build their businesses, learning from each other, growing together, building their businesses in collaboration, whether that be in partnership, or being patrons of each other’s businesses. 

We all need other entities to support our business, so creating that space for entrepreneurs to do that is something unique to how we’re approaching the impact that we can have, and the way that we’re thinking of capital. 

Social capital is just as valuable as financial capital, and that’s a key differentiator for us and something that we’re being very intentional about from day one. 

And then, when it comes to our financial products, we are coming to this work with a lens of correcting inequitable practices. 

As we think about our credit and lending products, we want them to be more equitable by incorporating underwriting processes and algorithms that will capture our customer’s creditworthiness and ability to repay in a way that’s representative of our current models and our current system’s models. 

We also want to be equally aware of the communities we serve and to think of Guava as serving a community as opposed to exploiting weaknesses that may exist. And that’s quite different from how financial institutions have approached their relationship with their customers before.

This conversation has been edited for conciseness and clarity. 

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To learn more about Guava, visit joinguava.com and connect with them on Instagram and LinkedIn.