Pay the cost to be the boss: Black entreprenuership in Los Angeles

A lover of fine art and helping children, Gail Hawkins dreamed of leaving her job as a pediatric physician's assistant to open a multicultural interior design store in Los Angeles. Skeptical loan officers weren't sure she could pull it off. They rejected her application. Hawkins looks back on the experience and says she may have been a victim of racial bias.

Leslie Jones had the upper hand when it came to developing, opening, and maintaining her Inglewood business, 1010 Wine and Events. A daughter of Black entrepreneurs, Jones attributes her success to her strong network of business-savvy and college-educated family members who instilled the skills necessary for her to be a thriving entrepreneur.

Phillip Lester worked four jobs and saved every dime to open the Ambassadors Shop in Watts without any strings attached or debt owed to lending agencies

All three of these entrepreneurs navigated the ins and outs of financial capital—the money needed to create, launch, and sustain a business.

“Historically, a lot of Black, Latino and native people don’t come from or have generational wealth in this country. Others who aren’t from excluded communities may have some form of access to generational wealth,” — says Adrian Veliz, program manager of the Vermont Slauson Education Development Corporation.

Discrimination in lending practices is the most common. Study after study blames systemic racial bias, corporate redlining, gentrification and other discriminatory practices for some of the hardships experienced by Black business owners. Lenders often base credit decisions on factors other than the applicant’s creditworthiness, according to Investopia.com.

Systemic ssues paired with a lack of education about the fundamentals of economics inhibit the financial elevation of Black entrepreneurs.

Edward Blum, a legal straegist who played a key role in eliminating affirmative action in college admissions, has now taken aim at a firm that provides funding to Black entrepreneurs. In today’s climate, the stakes are high as Blum’s activist group yearns to wipe out racial equity and equality within different institutional spaces.

Financial hardship affects all small business owners at some point in their journey, but Black business owners have a tougher time gaining financial support. According to the 2022 Women and Minority Business Owner Spotlight, almost half of Black business owners encountered problems with equitable access to capital. Less than a fourth did not know where to apply for capital; nearly half had no relationship with a loan lender; and almost half did not think they qualified or knew how to properly apply for capital.

According to a national Brookings Metro report and a study from the Federal Reserve Bank, many Black business owners have to resort to using credit and personal funds to finance their businesses. The average credit score by race is the following: Asian (745), white (734), other (732), Hispanic (701) and Black (677). African Americans also tend to rely on business cards to finance their businesses due to a lack of access to business loans, according to the U.S. Small Business Administration.

Hawkins opened Cultural Interiors in 2001, two years after her business partner left their initial joint apparel business called Rivals. A multicultural gift store in View Park, near Baldwin Hills, Cultural Interiors’s loyal customers helped it survive the 2008 recession and the 2020 COVID-19 shutdown.

“I found that when I tried applying—because I didn’t have enough time in the business... because I didn’t have enough background in the business—it was difficult trying to get money," she said.Nailing down a business loan proved to be a big challenge.

Gail Hawkins inside of her store. Photo by Kaleef Starks

With an established career as a physician assistant, Hawkins needed financial support to open her interior design store. She applied for a loan at Great Western Bank and loan officers turned her down for a variety of reasons, including lack of documentation, insufficient entrepreneurial experience, and potential qualms about changing careers.

“Some of the loan lenders were kind of skeptical about me starting something I had never done before,” says Hawkins. “They weren’t sure if I could pull off working in the medical field and running a store at the same time.” Gail Hawkins, Owner of Culteral Interiors

She sought help from the Small Business Development Corp. and was referred to a consultant for advice. The consultant's verdict: her business plan was not up to par. Looking back on that day, Hawkins says she may have experienced racial bias.

“It wasn’t even a full 10 minutes. He glanced at my paperwork and quickly said, ‘’This isn’t going to work’”, says Hawkins. "I was crushed and discouraged."

It took the owner of Cultural Interiors in Los Angeles several years to run her business before a bank would loan her money.

Hawkins grew up in the ‘70s in humble beginnings in southeast San Diego. A young girl with a passion for science, she pursued a postgraduate degree in the Physician Assistant Program at Charles Drew University in Los Angeles and had the opportunity to establish a 25-year-long career. Her husband pushed her to attend the Otis College of Art and Design and paid for her courses. He wanted to ensure she knew all about interior design before pursuing her dreams of owning her own store.

Gail with a customer at Culteral Interiors. Photo by Kaleef Starks

“I learned how to build a table so that I could physically do this. I learned to appreciate when you see someone’s work,” says Hawkins. “I also learned about money. Many people think that the quality of something as simple as a faucet, refrigerator, or stove doesn’t cost money to make.”

Hawkins worked as a physician assistant and business owner all the way up until she retired in October. She tapped her retirement funds and money from her job to sustain her business during hard times.

Cultural Interiors offers lush home decor, clothing, jewelry, furniture, and accessories. Hawkins said Cultural Interiors is often mistaken as a store that only sells items from Africa.

“The biggest headache is getting people to come in. Once they come in, they love it. I'm trying to get people to understand that just because I’m a Black-owned business doesn’t mean that I’m an African store," says Hawkins.

Hawkins has hired various marketing agencies to help customers understand that the products sold in her store have "accents of the Caribbean, West Africa, Japan, Mexico, South America, China, Indonesia, or East India,” according to the store’s website.

“I’m often pigeonholed a lot for being an African-themed store,” says Hawkins. “I am not an African-themed store; I am a multicultural gift store."

Despite the common misconception, the store has a lot of support from community members who visit, requesting pieces they have seen online. Multiple customers stop by throughout the day inquiring about certain items, such as black and white African-print chairs or green Tagua Nut Organic Nutshell earrings.

Small business owners tend to be the target of scammers and loan sharks, according to Hawkins. Multiple non-mainstream banks call her nearly every day, offering business loans with high interest rates. “Small businesses have it hard—Black, white,pink, yellow, or green—it doesn’t matter," says Hawkins. “They will say, ‘We will give you a loan with a 3% interest rate, and next thing you know, you’re reading the fine print and see it is 36%."

She also had a close call, almost being scammed by a business credit scheme through a Facebook ad. Upon seeing the advertisement, she shared it as a Facebook post to help other small business owners avoid falling for the trap.

To avoid scams and establish better opportunities for financial capital, Hawkins suggests that new business owners take heed and develop lending experience through their own banks.

“I went through my own bank, California Bank and Trust. I think that because they knew me, to some degree, it was better. Be very careful of the scammers because they will get you.”

Leslie Jones’ journey as an entrepreneur went more smoothly than that of many new business owners. She had access to capital through her family and is co-owner of 1010 Wine and Events, the first wine bar in Inglewood. Jones’ experience is a representation of the intersections of class and privilege. She did not receive an inheritance, but she did inherit a network, family support and knowledge to effectively run a business.

Leslie Jones and LeAnn Jones at 1010 Wine and Events. Photo courtesy of Leslie Jones

Jones humbly says that her family’s wisdom gave her an upper hand and sharpened her mindset to efficiently run a wine bar.

“We had a great foundation and that's why we were able to build the business that we've built now and why it's continuing to grow. There's a lot of stuff that we don't know,” says Jones. “We're still making mistakes. We are still learning along the way."

She attributes her success as co-owner to members of her family, such as her father, grandfather and sister, for instilling in her the principles of financial literacy.

Jones said her father's, aunt's, and grandfather’s careers as entrepreneurs inspired her to achieve her goals. Her aunt went to the Wharton School at the University of Pennsylvania.

“We have this foundation from our family and from our immediate network that a lot of people do not have. That has really helped us with opening our business, growing our business and maintaining our business."

Growing up, Jones always knew that she would one day be an entrepreneur but wasn’t sure what it would look like. After completing an internship in event planning, Jones found herself in a full-time career as a wedding planner but yearned for more. After years of working, Leslie and her sibling noticed a lack of fun things to do in Inglewood. Recognizing that they enjoyed wine and socializing, they became inspired to launch a wine bar.

WIne bottles under sign at 1010 Wine and Events. Photo by Kaleef Starks

She said the idea of opening a wine bar in Inglewood seemed unheard of years ago.

“We were tired of going outside of our community to enjoy food and wine,” says Jones. “We were like, you know what? There isn't a space like this in our city. Let's build one.”

During the earlier stages of obtaining a commercial property loan and getting the location for the wine bar, she and her business partner faced a lot of criticism about having a wine-centered bar in a predominantly Black and Latino neighborhood.

“People were saying, ‘You're opening up a wine bar? Black and Latino people don't drink wine," says Jones.

Glass of Wine at Wine Down Wednesday / 1010 Wine and Events. Photo by Kaleef Starks

They also faced delays and setbacks during the COVID-19 pandemic. They were in a state of flux, not knowing where to submit licenses, permits, and other important documents to move forward. The shut-down significantly hindered their timeline. After several months, their savings also dried up and their family helped them. Now they are running their day-to-day operations successfully.

As a child, Phillip Lester developed an entrepreneurial spirit by watching his stepfather, cousins,and uncles work multiple jobs to care for their families.

"When I was growing up, people always had side hustles like watering or cutting grass for $5,” says Lester. “Everybody wasn’t selling drugs. They were people that were just trying to make an honest living.”

A mathematics major in college, Lester had a passion for numbers, art and fashion. Community-oriented, Lester admires the Black business owners from the late ‘70s and ‘80s during his time as a child growing up in South Central Los Angeles. Phillip is intentional about keeping his business in the neighborhood because he is rooted in building his community.

The Ambassador Shop of Watts is an apparel, tattoo, and piercing shop that provides services to the people in the Watts neighborhood. Lester and his fiance rented the location’s space for a year and a half, enhancing its interior piece by piece until its grand opening.

“We just kept adding to it. All we were basically doing is paying rent. We worked to get the crumbs and put this together

Lester and his fiance saved every penny to avoid having to apply for a business loan or venture capital. He worked three to four jobs and had a connection to a space in Watts that he rented and built from the ground up. The fruit of his labor paid off as he managed to thrive through the pandemic, selling the clothing of local vendors.

One section of the colorful and artistic building functions as a retail store where Lester houses his own clothing brand, other vendors' clothing, and accessories. A tattoo parlor is also in the back of the shop, as are paintings of various community leaders, such as Arturo Ybarra, founder of Watts Century Latino. He offers internships to adults in the community as well.

“I’m contributing to the community by employing young people and inspiring young people to do something,” says Lester.

The Ambassadors Shop of Watts also has another section of the property that houses equipment for clothing design, press, and print for marketing purposes. He and his employees teach a seasonal youth entrepreneurship course to middle and high school youth from the Watts community. 4 to 6 students are selected with the opportunity to develop skills such as store inventory, customer service, and clothing design. The youth make graphic t-shirts and are also paid during their internships. Lester hopes that other disadvantaged communities can model his path.

“We make them into the next entrepreneur instead of the next drug dealer. We are marketing our community in a different way. We are changing the narrative."

Lester did not want to rely on a loan from a bank or anyone else to make his dreams come true. He felt that if he initially borrowed money for his start-up, it would give investors leverage to change the vision that he had for his company. Lester also did not know how successful his store would be and did not want to get locked into having to pay back a hefty business loan.

"Initially, starting out, I wasn’t sure of how well we would do as a store and didn’t want to be in an economic bind,” says Lester. “Financial bonds are what kill small businesses. They go bankrupt and shut down. I didn’t want that to be my story."

The plight of Black entrepreneurs in America today draws a variety of reactions. Some are supportive; others want to hold back progress. Still others want to increase community programs to foster small business ownership.

The Fearless Fund is a venture capital group developed by three Black women; one of the most notable is female actor Keisha Knight Pulliam. The group awards four grants of $20,000 each to women of color business owners.

This nationwide program drew the ire of none other than Edward Blum, whose organization, the American Alliance for Equal Rights, led the fight against affirmative action in college admissions that ended with the U.S. Supreme Court’s ruling last summer. Blum filed a lawsuit against the Fearless Fund. The lawsuit alleged reverse discrimination. Ed Blum’s organization was successful as a judge granted a halt to the Black venture capital group’s progress. Despite Blum’s efforts, Black professionals are figuring out ways to fund, develop and sustain their businesses.

One such community-based program that continues to thrive in Los Angeles is the Vermont Slauson Economic Development Corporation Business Source, created by the late Marva Smith Battle-Bay. Battle Bay, an urban development leader since the late ‘80s, Battle-Bay has focused on expanding the infrastructure of South Los Angeles.

The funding institution was created 35 years ago to help the South Los Angeles area thrive through local businesses. It is a community development financial institution that has “produced more than $60 million in physical development projects; created and retained more than 3,000 jobs; and served over 25,000 pre-startups, startups, and operating businesses, the vast majority of whom are minority-owned (90%) or low-income (82%)," according to the group’s website.

The Vermont Slauson Economic Development Corporation acts as a resource hub for anyone who is interested in creating a business from the ground up. The company has two locations in the greater Los Angeles area: Watts and Southern Los Angeles. Adrian Veliz is the program manager and Ronald Watkins is an outreach specialist.

A lack of economic opportunities and knowledge is what hinders Black entrepreneurs' access to capital, says Low.

“They're not talking about economics education, period. They just talk about history, math and English. They’re not really giving you the tools you need to go out in this world to really be successful because you don't have any education in economics,” says Watkins.

Adrian Veliz suggests similar sentiments and offers a historical context about the lack of financial knowledge within Black and Latino communities.

“Black and Latino folks generally don’t have generational wealth that was passed down within our families. History has shown that through redlining and much more,” says Veliz. “Some people can get access to capital through their families’ property or businesses that are handed down.”

Veliz has been in his role for the past two years, having previously worked 16 years with L.A. County youth programs. He wanted to help Black and Latino small businesses get access to financial capital to sustain themselves.

“A lot of small businesses need equipment, goods, a space and operational money to launch,” says Veliz. “In some cases, it can also be money for rent and utilities to get a small business to operate.

Both suggest that Black and Latino people tend to not know where to start when it comes to developing a business.

Although black entrepreneurs may experience ups and downs, anything is possible if they have the right resources, support system, connections, and direction.