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August is National Black Business Month, a perfect time to celebrate and support Black-owned businesses in the U.S. As business owners, people of color can establish financial independence for themselves and their families, and provide employment opportunities for others in their community.
Moreover, small business owners contribute to the health of the local economy by paying taxes that go into city and state coffers. When they occupy retail space, neighborhoods become more dynamic.
Starting a venture and then keeping it going is no easy feat, however. A substantial number of small businesses don’t make it past a few years, and Black business owners tend to fare worse. The Federal Reserve 2021 Small Business Credit Survey found that while most owners experienced financial hardship during the pandemic, the highest rate, at 92 percent, was reported by Black business owners. Throughout the years, Black business owners have faced a myriad of hurdles, based on both overt and covert racism, with some biases continuing today. Given the disparity, you may want to help. Here’s how. 18.7% of U.S. employer businesses are minority-owned (U.S. Census Bureau 2020 Annual Business Survey )
13.6% of the U.S. population is Black or African American (U.S. Census 2021 Quick Facts )
There are 3.12 million Black-owned businesses in the U.S. (2022 Brookings Institute report )
46% of all Black entrepreneurs are women (2021 Guidant Financial report )
Black-owned businesses support 3.56 million jobs in the U.S. (2022 Brookings Institute report )
Fayetteville, N.C., has the highest percentage of Black-owned businesses in the U.S. (LendingTree study )
Why supporting Black-owned businesses is important
Although Jim Crow laws were deemed unconstitutional in 1954 and the civil rights movement of the 1960s forced the end of segregation, unfair banking practices persisted. It wasn’t until 1977, when the federal Community Reinvestment Act was passed to fight racial discrimination in lending, that these practices became illegal.
Challenges remain. Statistically, securing capital and investors is more difficult for Black-owned businesses. Crunchbase reported that Black startups received just 1.2 percent of the $147 billion in venture capital invested in U.S. startups in the first half of 2021.
According to a 2020 Bureau of Economic Research paper, the average level of startup capital for Black entrepreneurs is just $35,205, compared to $106,720 for white entrepreneurs. Only 1 percent of Black businesses obtain business loans in their first year, as opposed to 7 percent of white-owned firms.
A study commissioned by Groupon and the National Black Chamber of Commerce found that 59 percent of Black business owners reported being victims of racism or bias when starting their business.
The disparity continued during the Covid-19 pandemic. The New York Times reported that Black business owners had a harder time finding lenders who would work with them for the Paycheck Protection Program than white business owners.
And then there’s the racial wealth gap . A 2021 Duke research paper found the typical Black household holds about 12 cents for every dollar of wealth that the typical white family holds.
For these reasons, you may be motivated to take action and support Black-owed businesses. Not only will you be a force for economic good, but it can be a way to celebrate and continue Black culture. Bolstering sales can help prove to lenders that the company has intrinsic worth. And by becoming a regular shopper, you increase the company’s visibility and representation. 6 ways you can support Black-owned businesses
There are a number of easy ways you can do your part to support Black-owned businesses: Be intentional about shopping at Black-owned businesses
You may not know where to find small Black-owned businesses. Apps such as Nextdoor and community boards like Craigslist can be an easy way to learn. Create a post where you ask who in your neighborhood or city could use some extra business, and wait for the replies to pour in. It’s also a great way to spark a conversation about the value of helping each other out.Another option is to use a sourcebook as […]
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