by Mary Spiller
December 16, 2025
A lawsuit challenging a privately funded lending initiative has drawn national attention — and heavyweight legal backing on both sides.
A legal battle unfolding in federal court is placing a Knoxville-based microloans program for Black-owned businesses under national scrutiny, pitting conservative legal advocates against prominent civil rights organizations, according to Knox News.
The dispute centers on a small-business lending initiative run by The Women of Knoxville and its affiliated nonprofit, The Women Foundation. The program offers low-interest microloans and mentorship to entrepreneurs in East Knoxville, with eligibility requiring businesses to be at least 51% Black-owned.
The American Alliance for Equal Rights, a group founded by affirmative action opponent Edward Blum, filed a lawsuit arguing the program unlawfully discriminates based on race. The case was brought by an unnamed white business owner affiliated with the organization, who claims the race-specific criteria violate federal civil rights laws. The funds in question are privately raised and do not involve taxpayer dollars.
The Women of Knoxville was established in 2019 by a group of local business leaders and activists — Deidra Harper, Tanika Harper, Dasha Lundy and Kanika White — after discussions about the economic barriers facing Black residents in the city. The group says the program was designed to address persistent gaps in access to capital rooted in Knoxville’s history.
Civil rights groups have stepped in to defend the initiative. The Southern Poverty Law Center and the Global Black Economic Forum filed legal briefs in support of the Knoxville organizations. SPLC deputy legal director Scott McCoy criticized the lawsuit, saying it “perverts the federal civil rights laws in a way never intended.”
The Alliance has successfully challenged race-conscious grant programs in the past, including the more recent microloan program, and has prevailed in a recent Texas ruling involving business funding. Blum also founded Students for Fair Admissions, the organization behind the Supreme Court case that effectively ended race-based college admissions.
In court filings, supporters of the Knoxville program point to decades of redlining and urban renewal policies that disproportionately harmed Black neighborhoods. Organizations, including the Highlander Research and Education Center and the Knoxville Area Urban League, submitted filings detailing how federal and local actions stripped Black residents of wealth and opportunity.
“These programs exist because the disparities still exist,” the Knoxville organizations argued, calling the initiative “a targeted, lawful effort to address a real-world problem, not ‘rank discrimination.’”
They also contend the lawsuit lacks standing, noting the unnamed plaintiff never applied for funding and has not been denied assistance. Claims of “irreparable harm,” they argue, are unfounded given that the grants are modest and the business remains solvent.
The nonprofits further argue that private charitable programs should not be subjected to the same scrutiny as government-funded initiatives — a distinction they say the Alliance ignores.
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