Giving Small Businesses Free Money through the Incentive Grant

Kiylah O’Brien has dreamed of starting a beauty supply store since she was a senior in high school. She loved hair and makeup and studied fashion merchandising at Drexel.

After working a few corporate jobs for a few years, she decided she was ready to open her own brick and mortar beauty supply store — but there were a lot of start-up costs. In addition to rent, business fees, and the like, she needed shelving and stock: natural haircare products, cosmetics and accessories. Just getting the doors open would cost her tens of thousands of dollars that she didn’t have.

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Black women like O’Brien often struggle to access loans and other traditional forms of capital. Black founders of all genders face a three-times higher rejection rate compared to their White counterparts when applying for funding to start their businesses. What’s more, 61 percent of Black women end up self-funding their businesses — a major obstacle not just in regards to the business itself, but also when it comes to building wealth from that business.

In late 2023, O’Brien found a storefront in Overbrook and was looking for funding to help her. She applied for a loan from Entrepreneur Works, a Community Development Financial Institution (CDFI), which also told her about Incentive Grants. Launched in 2022, the Incentive Grant program is a City initiative designed to help entrepreneurs from groups who have historically struggled to access traditional funding launch and grow their businesses. The program offers a matching grant from the City if Entrepreneur Works approves you for a loan. For Black women entrepreneurs like O’Brien, it can be a game changer.

Entrepreneur Works helped her apply, and O’Brien received $20,000 to start her business — a $10,000 loan from Entrepreneur Works and a $10,000 grant from the City. She opened her store, Beauty2Go, in February of 2024.

The program is one of several the City has launched in recent years to help small businesses — especially those owned by women and people of color — grow amidst challenging economic conditions.

Joseph Vargas (center) of South Philly Italian Kitchen, a BYOB that received two loans matched with Philadelphia Commerce grants. The restaurant is moving to a new South Philadelphia location this fall.

Launching the Incentive Grant program

In 2017, the City’s Commerce Department launched the Philadelphia Business Lending Network, or PBLN, a platform of lenders who offer small business loans. The idea: Create a single, simplified, streamlined means for small Philadelphia business owners to apply for loans to start or grow their business. Today, more than 30 institutions, including multiple banks and CDFIs like Entrepreneur Works, participate in the PBLN. To apply, a business owner fills out a standard form, and interested PBLN funders reach out to them.

The platform worked for a bit, but interest dwindled after a few years. Businesses needed more funding than lenders felt comfortable giving, based on credit history or other factors. So, five years later the Commerce Department created the Incentive Grant program, offering the chance to receive an additional, matching sum that they don’t need to repay. It’s also easy to apply. Entrepreneurs just have to check a box on the PBLN interest form saying they’re interested in the Incentive Grant. Then, lenders help them secure the grant as part of the loan process.

“We’ll give you access to capital and we’ll help you make sure that you’re using it in the best possible manner. We’re targeting it towards growth.” — Yvonne Boye, Office of Neighborhood Economic Development.

“The grant is attached to the loan. So what that means is if they do not close on a loan, they cannot receive the grant,” explains Tiffany Justice, senior director of small business resources with the Department of Commerce’s Office of Neighborhood Economic Development.

The Incentive Grant program has given out around $2 million in grants since its inception. For their part, Entrepreneur Works has given out 15 loans totalling $257,000 in the same period. Entrepreneur Works President and CEO Leslie Bonliel notes the program has helped existing clients expand, but has been particularly beneficial for people like O’Brien looking to start a business. “It really gave them more of a runway to start up their business, in terms of time and capital,” says Benoliel.

Helping small businesses build wealth

To be eligible for the Incentive Grant program, businesses and their owners must be based in Philadelphia, have five or fewer employees — making them a “microbusiness” — and an annual revenue of $350,000 or less. They must also be up-to-date on their taxes and have the appropriate business licenses.

“They get the money upfront, and that’s theirs to invest in the business,” Benoliel says.

For every Black-owned firm with employees in Philly, there are 23 Black-owned non-employer firms, according to data from Drexel’s Small Business Equity Toolkit. That means most Black-owned businesses in Philly are microbusinesses — and therefore eligible for the program.

Lending partners like Entrepreneur Works have their own commitments to helping minority-owned businesses, too. Eighty percent of the businesses they’ve supported over their lifetime are minority-owned. Lending institutions involved in PBLN often offer coaching and business planning services, which can further help businesses grow.

Jovace Nelson, a Black man in a Flyers jersey and black pants, stands outside an ice-less skating rink at FDR Park in December 2023. — Jovace Nelson of Vacetime Landscaping, a grant recipient, at FDR Park in December 2023.

That’s what happened with VaceTime, a Black-owned landscaping firm that received an Incentive Grant after working with Entrepreneur Works. They needed additional funds to scale their operations and secure and fulfill larger contracts. The Incentive Grant they received allowed them to expand enough to be able to work on projects at the Philadelphia International Airport.

“It’s building that wraparound ecosystem that really helps with sustainability,” Benoliel says.

Launched in 2022, the Incentive Grant program is a City initiative designed to help entrepreneurs from groups who have historically struggled to access traditional funding launch and grow their businesses.

Small businesses and the tough economy

Small businesses are struggling with inflation, proposed tariffs and freezes in federal government grants and contracts. Locally, Benoliel has seen businesses close or search for new locations, due to landlords raising rent on retail spaces.

“There’s a lot of challenges in our very uncertain economy. The big picture data looks okay, but for the business owners, I just know how crazy it is,” Bonliel says. “What we often see is many of our businesses are renting [space], and the building gets sold, or the lease ends and the rents go up, they’re kicked out of the building.”

Philadelphia Commerce grant and loan recipient Ikram Najid, founder and owner of In Beauty, used the funds to buy supplies, equipment, inventory and marketing.

Philly’s smallest businesses — those that benefit from the Incentive Grant program — expect to further struggle this coming year due to the elimination of a 10-year-old exemption that allowed them to exclude their first $100,000 in revenue from the Business Income and Receipts Tax. Mayor Cherelle Parker removed the exemption in March, after the Massachusetts-based company Zoll Medical Corp., which does business in Philly, sued the City, alleging the BIRT exemption violates the state constitution.

The City is trying to address some of these challenges. Parker set aside funds — about equal to the $30 million the City stands to gain from eliminating the BIRT exemption — for grants and technical assistance for small businesses to help them adjust. City Council added an additional $17 million to support these efforts.

These resources are intended to help small businesses adjust to the transition, but in these difficult economic times they also need financial support to help them grow so that entrepreneurs can build wealth. In February, the City partnered with some of the members of PBLN, including Entrepreneur Works, on the $5 million Catalyst Grant program, to support small businesses that are ready to grow.

Businesses need to submit a growth plan as part of their application and the City will give them funds of up to $50,000 to help achieve it. CDFIs will help them with coaching and other support so they can implement their plans. The Commerce Department hopes to support 150 businesses with the program, according to Yvonne Boye, deputy commerce director for the Commerce Department’s Office of Neighborhood Economic Development.

“We’ll give you access to capital and we’ll help you make sure that you’re using it in the best possible manner,” says Boye. “We’re targeting it towards growth.”

Every Voice, Every Vote funds Philadelphia media and community organizations to expand access to civic news and information. The coalition is led by The Lenfest Institute for Journalism. Lead support for Every Voice, Every Vote in 2024 and 2025 is provided by the William Penn Foundation with additional funding from The Lenfest Institute for Journalism, Comcast NBC Universal, The John S. and James L. Knight Foundation, Henry L. Kimelman Family Foundation, Judy and Peter Leone, Arctos Foundation, Wyncote Foundation, 25th Century Foundation, and Dolfinger-McMahon Foundation.