Since 1976 every U.S. president has designated February Black History Month to honor the achievements of Black Americans. And while the growth of Black-owned businesses is undoubtedly one of the achievements to celebrate, Black business owners still face formidable challenges.
Last fall, the U.S. Census Bureau released the 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 receipts and employing 1.3 million workers. Yet, according to Brookings, Blacks comprise 14.2% of the U.S. population, but only own 2.3% of all employer firms.
Additionally, there are about 3 million Black-owned businesses without employees. So, in total, there are approximately 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 containing some eye-opening stats about the “Black entrepreneurial experience in America.” It shows that “in addition to the pressures of running a business, Black business owners must navigate racism and biases that threaten their success.”
Black business owners must deal with racism
According to the report, 79% of Black business owners say they’ve experienced racism from a customer—with 48% reporting they had a racist customer interaction at least once in the past year.
Most (86%) of the Black business owners surveyed believe their businesses are “judged 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 customer and vendor interactions.
But this 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 murder of George Floyd and the Covid-19 pandemic, 46% of Black business owners who advertise their businesses as “Black-owned” think it is a deterrent to non-Black customers.
Funding 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 versus $16,000).
- While evidence shows it could take over 200 years to close the Black-white wealth gap, 73% of the Black business owners surveyed are optimistic it will significantly decrease in the next 100 years.
Bank of America’s 2022 Women & Minority Business Owner Spotlight reveals similar financial challenges for Black business owners—46% say they’ve faced issues accessing capital, and other challenges, including:
- 39% not feeling adequately informed about how to apply for capital
- 38% don’t have a relationship with a lender
- 21% don’t know where to apply for capital
Goldman Sachs10,000 Small Businesses Voices also released new survey data this month about Black small business owners revealing that 37% had difficulty accessing 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 to Capital Directory for Black Entrepreneurs.
Businesses’ effect on Black communities
Black business owners are working to build stronger communities—75% told Intuit QuickBooks they believe Black-owned businesses are critical for 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 the Black entrepreneurs in the QuickBooks report want to see more mentoring 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.
What do Black business owners want?
Easier access to financing is at the top of their list. This is not surprising since 40% of the Black entrepreneurs in the Bank of America report don’t believe they’ll ever get 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 is sourced from personal networks. Unfortunately, the majority of early-stage Black entrepreneurs don’t have access to them…Following the George Floyd tragedy, I’m gradually seeing early-stage Black entrepreneurs obtain the necessary capital needed to execute their visions and fairly compete 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 Businesses Voices is calling for bigger change. Its National Leadership Council Chair, Jessica Johnson-Cope, says, “This Black History Month, we ought to celebrate the increasing success of Black-owned small businesses in this country. However, Black business owners and entrepreneurs continue to face systemic barriers relative to their peers. Our leaders in Washington must commit to removing these obstacles and allow Black businesses like mine to thrive.”
What does that look like? Goldman Sachs 10,000 Small Businesses 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.”