By Rieva Lesonsky
Black business owners want their businesses to contribute to a thriving black community.
Since 1976, every US president has designated February as Black History Month to honor the achievements of black Americans. And while the growth of black-owned businesses is certainly one of the accomplishments to celebrate, black business owners still face major challenges.
Last fall, the U.S. Census Bureau released its 2021 Annual Business Survey (covering 2020), showing an estimated 140,918 black-owned businesses with employees in the country, earning $141.1 billion in annual revenue and employing 1.3 million. workers. However, according to Brookings, blacks make up 14.2% of the US population but own only 2.3% of all employer firms.
Additionally, there are approximately 3 million black-owned businesses with no employees. So in total, there are approximately 3.12 million black-owned businesses, generating $206 billion in annual revenue and employing 3.56 million workers.
Intuit QuickBooks recently released a new Insights Report that contains some eye-opening statistics about the “black entrepreneurial experience in America.” He points out that “in addition to the pressures of running a business, black business owners must navigate the racism and prejudice that threaten their success.”
Black business owners must deal with racism
According to the report, 79% of black business owners say they have experienced racism from a customer – with 48% reporting having a racist customer interaction at least once in the past year.
A majority (86%) of black business owners surveyed believe their businesses are “judged more critically than non-black businesses.” Additionally, the report states that black business owners “feel the impact of racial disparities” every day. So, to avoid negative racial stereotypes, 82% say they behave differently in interactions with customers and vendors.
But it serves as a motivating factor – 94% say they are “motivated to succeed by a desire to disprove racial stereotypes.”
Despite what proved to be a temporary surge in consumer support following the killing of George Floyd and the Covid-19 pandemic, 46% of black business owners who advertise their businesses as “black-owned” feel it is a barrier to non-black customers. .
Financing and black-owned businesses
The Intuit QuickBooks report also shows that 57% of black business owners were denied a bank loan at least once when they started their businesses, compared to 37% of non-black business owners.
On average, it costs black entrepreneurs $5,000 more to start a business than their non-black peers ($21,000 vs. $16,000).
- While evidence suggests it may take over 200 years to close the black-white wealth gap, 73% of black business owners surveyed are optimistic it will decrease significantly in the next 100 years.
Bank of America’s 2022 Women and Minority Business Owner Spotlight reveals similar financial challenges for black business owners — 46% say they’ve faced problems accessing capital and other challenges, including:
- 39% do not feel sufficiently informed about how to apply for capital
- 38% do not have a relationship with a lender
- 21% do not know where to apply for capital
Goldman Sachs 10,000 small business voices It also released new survey data this month about black small business owners, revealing that 37% had difficulty accessing capital and new financing — 14 percentage points higher than their non-black peers. And in the past three months, 45% had to dip into their personal savings to keep their businesses afloat.
To help Black entrepreneurs discover funding opportunities, including equity, loans and grants, Bank of America and Seneca Women launched the Access to Capital Directory for Black Entrepreneurs.
The effect of businesses on black communities
Black business owners are working to build stronger communities—75% told Intuit QuickBooks they believe black-owned businesses are critical to a thriving black community. And according to the Bank of America report, 87% are committed to driving social change through their businesses.
To help their communities grow, 55% of black entrepreneurs in the QuickBooks report want to see more mentorship from other black business owners. According to the Bank of America report, 44% of black business owners did not have a mentor and 56% were self-taught.
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What do black business owners want?
Easier access to financing is at the top of their list. This is not surprising since 40% of black entrepreneurs in the Bank of America report do not believe they will ever have equal access to capital. And 75% say they have to work harder to achieve the same level of success as their non-black peers.
Despite all these challenges, all three reports found that black business owners are optimistic about the present and the future:
- 85% were able to pay themselves last year (QuickBooks)
- 81% are optimistic about the financial trajectory of their businesses this year (Goldman Sachs)
- 79% say their companies are successful (Bank of America)
- 78% expect their businesses to earn higher profits in 2023 (Goldman Sachs)
- 67% expect their businesses to create new jobs this year (Goldman Sachs)
Some black entrepreneurs are also feeling hopeful. Angel Cornelius, founder and CEO of New York-based Maison 276, told Business Insider, “For most entrepreneurs, early-stage capital comes from personal networks. Unfortunately, most early-stage black entrepreneurs don’t have access to those… After the George Floyd tragedy, I’m gradually seeing early-stage black entrepreneurs get the capital they need to execute their visions and compete competitively. right in today’s market. And I believe that the success of these entrepreneurs will serve as the foundational capital to support and nurture the next generation of entrepreneurs from our community.”
Goldman Sachs 10,000 small business voices is calling for greater change. National Leadership Council Chair Jessica Johnson-Cope says, “This Black History Month, we need to celebrate the growing success of Black-owned small businesses in this country. However, black business owners and entrepreneurs continue to face systemic barriers compared to their peers. Our leaders in Washington must commit to removing these barriers and allow black businesses like mine to thrive.”
What does this look like? Goldman Sachs 10,000 small business voices has asked Congress to reauthorize the Small Business Administration, legislation to reauthorize and modernize key SBA programs for the first time in 23 years. It says, “Modernization would improve access to capital and financing options for black-owned small businesses, as well as simplify the certification process for minority-owned business programs.”
About the Author
Rieva Lesonsky is the CEO of GrowBiz Media and SmallBusinessCurrents.com and has been covering small business and entrepreneurship for over 30 years. Get more information about business trends by signing up for it free STREAMS newspaper.
