By Rieva Lesonski
Every US president since 1976 has declared February Black History Month to honor the achievements of Black Americans. And while the growth of black-owned businesses is undoubtedly one of the successes to be celebrated, black business owners still face formidable challenges.
Last fall, the United States Census Bureau has released the 2021 Annual Business Survey (for 2020), showing an estimated 140,918 black-owned businesses in the country, earning $141.1 billion in annual revenue and employing 1.3 million workers. Yet according to BrookingsBlacks make up 14.2% of the US population, but own only 2.3% of all employer companies.
In addition, there are approximately 3 million black-owned businesses with no employees. Thus, in total, there are about 3.12 million black-owned businesses, generating $206 billion in annual revenues and employing 3.56 million workers.
Intuit QuickBooks recently released a new insights report with some dazzling statistics on the “black entrepreneurial experience in America.” It shows that “in addition to the pressures of running a business, black business owners must deal with racism and prejudice that threaten their success.”
Black entrepreneurs must deal with racism
According to the report, 79% of Black business owners say they’ve experienced racism from a customer — and 48% report having had a racist customer interaction at least once in the past year.
Most (86%) of Black business owners surveyed believe their business is “reviewed more critically than non-Black businesses.” In addition, the report says 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 sellers.
But this serves as a motivating factor: 94% say they are “motivated to succeed by a desire to challenge racial stereotypes.”
Despite what turned out to be a temporary surge in consumer support following the murder of George Floyd and the Covid-19 pandemic, 46% of Black entrepreneurs who advertise their business as “Black-owned” believe it is a deterrent to non- black customers.
Finance and business in black hands
The Intuit QuickBooks report also shows that 57% of Black entrepreneurs were denied a bank loan at least once when they started their business, compared to 37% of non-Black entrepreneurs.
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 shows that it could take more than 200 years to close the black-white wealth gap, 73% of black entrepreneurs surveyed are optimistic that it will decline significantly over the next 100 years.
Bank of America 2022 Entrepreneurs for women and minorities in the spotlight reveals similar financial challenges for black business owners – 46% say they have had trouble accessing capital and other challenges, including:
- 39% feel insufficiently informed about applying for capital
- 38% have no relationship with a lender
- 21% do not know where to apply for capital
Goldman Sachs 10,000 votes for small businesses also released new research data this month on Black small business owners who revealed that 37% struggled to access new capital and 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 Capital Directory for Black Entrepreneurs.
The effect of corporations on black communities
Black business owners work to build stronger communities – 75% told Intuit QuickBooks they believe black 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 companies.
To help grow their communities, 55% of black entrepreneurs in the QuickBooks report want more guidance from other black entrepreneurs. According to the Bank of America report, 44% of Black entrepreneurs had no 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, given that 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 need 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% could pay for themselves last year (QuickBooks)
- 81% are optimistic about their company’s financial trajectory this year (Goldman Sachs)
- 79% say their businesses are successful (Bank of America)
- 78% expect their company to make higher profits in 2023 (Goldman Sachs)
- 67% expect their companies to create new jobs this year (Goldman Sachs)
Some black entrepreneurs also feel hopeful. Angel Cornelius, founder and CEO of the New York-based company House 276told Business Insider, “For most entrepreneurs, seed money comes from personal networks. Unfortunately, the majority of black startup entrepreneurs don’t have access to it… After the tragedy of George Floyd, I’m gradually seeing black startup entrepreneurs obtain the necessary capital needed to carry out their visions and compete fairly in today’s market. And I believe the success of these entrepreneurs will serve as the fundamental capital to support and nurture the next generation of entrepreneurs from our community.”
Goldman Sachs 10,000 votes for small businesses calls for greater change. National Leadership Council President Jessica Johnson-Cope says, “This Black History Month, we should be celebrating the increasing success of small black businesses in this country. However, black business owners and entrepreneurs still face systemic barriers to their peers. Our leaders in Washington must commit to removing these obstacles and ensuring black businesses like mine can thrive.”
What does that look like? Goldman Sachs 10,000 votes for small businesses asked Congress reauthorize the Small Business Administration, legislation to reauthorize and modernize major 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, and simplify the certification process for minority-owned business programs.”
About the author
Rieva Lesonsky is CEO of GrowBiz Media and SmallBusinessCurrents.com and has been dealing with small businesses and entrepreneurship for over 30 years. Get a better understanding of business trends by signing up for her free currents newsletter.