How Unconditional Cash Transfers Filled The Gap

A Nation of Dreamers

When we first asked Darnell, a father of three, where he saw himself in five years, he said: “I wouldn't mind working for another landscaping company but, if I could become financially stable and do everything I need to do, I would like to have my own [landscaping company] by then.”

Like Darnell, many recipients dream of starting their own businesses. This trend was particularly notable among Black participants, who were 8 percentage points more likely to report having an idea for a business–a 12.5% increase from their control participant counterparts. By year three, 74% of Black recipients say they have an idea for a business at the end of the program compared to 66% of Black control participants.

A Promising Find

According to the 2022 Annual Business Survey conducted by the U.S. Census Bureau and the National Science Foundation, the number of Black-owned businesses and their gross revenues are on an upward trajectory. Regina, a recipient of the cash transfer and a single mother of two, exemplifies this trend. " Nearly two years into the program, Regina announced the start of her long-anticipated aromatherapy business.

Regina's announcement marked a unique milestone. 

Despite the growing number of Black-owned businesses in the United States, Black entrepreneurs remain underrepresented in comparison to the overall Black population, due largely to a lack of start-up funding.¹ While Black entrepreneurs apply for business loans at a higher rate, they receive funding at significantly lower rates compared to their White counterparts. The widespread closure of financial institutions in mostly Black neighborhoods compounded by discriminatory lending practices means that sadly, this trend appears to be worsening over time.² 

When Regina launched her business, she allocated a portion of her cash transfer toward acquiring supplies and covering her business licensing fees. However, she still required additional start-up funding to address expenses related to production, shipping, and marketing. "Right now, I'm in the process of applying for various grants. I'm dedicating time to writing proposals... I just need the financial support to kickstart everything. I need funding to purchase essential products... like a cash register," she explained.

Unconditional cash transfers as an alternative to traditional loans 

Black study participants stood out as more inclined than other ethnic and racial groups to initiate or contribute to starting a business, specifically in the third year of the program. Though we do not see an effect on actually starting businesses across the full sample, exploratory analyses suggest that by the third year, Black recipients were 9 percentage points more likely to report starting or helping to start a business than control participants (a 26% increase). What we gleaned from the qualitative experiences of Black participants who ventured into entrepreneurship is that the cash transfer payments served as viable substitutes for conventional loans. Participants utilized the cash transfers to finance various aspects of launching their business – such as enrolling in online courses, obtaining professional certifications, procuring essential equipment, and developing marketing materials.

Facing the challenges of being overworked and financially strained, Nyah, a Black mother of three, made the decision to augment her income by launching a small art business. To realize her ambition, she utilized a portion of her cash transfer to enroll in online courses offered on platforms like Patreon. These courses covered a wide range of topics, including entrepreneurship, financial management, and investment. She saw these classes as an opportunity to enhance her financial literacy. Her ultimate goal was to secure venture capital and eventually establish and oversee her own digital art business. 

Marcus also had aspirations to be an entrepreneur after serving a four year sentence for selling drugs. At the beginning of the study, he was struggling to get back on his feet and was living with family members, essentially “house hopping.” The cash transfers made it possible for him to get his own place and to start his own small  business.

That money went towards an 8 in 1 heat press machine and a digital sewing machine. “It put me in a better position. I was really like probably three weeks out of prison, and I had no income, I had no job,” he remembers. Within a few months of receiving the cash transfer payments, Marcus got his LLC license and came out with his own clothing line. By the end of the program, he had settled on designing mostly urban wear and was working on getting a vendor that could sponsor his business plan.

In Texas, Anthony had similar artistic dreams. When he wasn’t working his main job at an electronic store, he experimented with all mediums, gravitating mostly toward digital art. At first, Anthony was producing art mostly for himself, that is until “someone saw my work and decided that it was good enough to pay for it.” 

Anthony took steps to showcase his art, attending art conventions and engaging with his local community to expand his network. He utilized the cash transfers to invest in a higher-quality computer, which facilitated his ability to produce better artwork. By the third year of the program, Anthony’s efforts had borne fruit, frequently fielding requests for private art commissions.

“It's becoming a lot more lucrative,” Anthony said. “I want it to be one of those things where it runs itself,” he dreams. Today, Anthony is getting so many requests that he works daily on his art and it has become a primary source of income.

Impact of Unconditional Cash Transfers on Black Entrepreneurship 

Black recipients experienced personal satisfaction and additional income with starting new businesses, but this also has implications for added benefit beyond the individual. Studies prove that Black business owners are more likely to hire Black employees, reducing unemployment in their communities.³ In the long-term, unconditional cash transfers supporting Black businesses could prove an opportunity to build intergenerational wealth, a prospect that has historically faced obstacles in Black communities.

Qualitatively we heard, both from recipients who expressed a desire to start their own businesses and those who actually did, that they used the cash transfers to help cover startup expenses. For some, this investment helped them achieve their aspirations of becoming first-time business owners. Though the cash increased the possibility for Black recipients to start businesses, this is not to suggest that $1,000 each month is enough to sustain businesses long term or ensure profitability. It is well documented that survival rates for new businesses are grim.⁴ Yet what our data do suggest is that $1,000 per month increased the possibility of Black businesses and under certain conditions, like for Anthony, these possibilities became realities. 

Disclaimer: These stories and participant experiences are not meant to be representative of all qualitative participants. Instead, they are in-depth snapshots of the lived reality of cash transfer recipients across different areas of their lives and at distinct periods during the program.

Methodological Statement: The data for this piece comes from five rounds of in-depth, semi-structured qualitative interviews with 156 participants. Interview summaries, field notes, thematic memos and extensive case memos reflecting data from all five rounds were coded using an iterative and open coding method. The initial findings reflected in these pieces were identified during this first round of open coding.