Financing challenges consistently rank as the number one concern of Black small business owners. Black-owned companies receive less funding than other businesses and have less capital overall. This can make it challenging to start and sustain new businesses. Black small business owners rely more on personal credit or investment to meet their capital needs. This can lead to even more uncertainty. Minority applicants are still subjected to increased scrutiny when applying for a small-business loan. Many African Americans do not even try to get outside funding for their business, which makes them more susceptible to closing down.
Black business owners also have less access to peer support and mentorship than merchants. Small business owners often need to pay more attention to the importance of mentorship and networking. Having a mentor on your side can lead to higher revenue and growth. Mentors can help small business owners with several things, from providing business and marketing guidance to increasing access to networking.
The Covid-19 Pandemic and the resulting closure have only worsened the problems that Black Businesses face. Many businesses, already struggling with tight budgets, have been thrown into a financial crisis due to the shutdowns. Black businesses, however, have been hit particularly hard. The funding problems directly affect the PPP Loan Program and other government-backed funds for small businesses. This includes the CARES Act. Black companies are also more likely to be affected by the pandemic, as they have been hit harder. These businesses are more likely to have sole proprietorships run by the owners, which means they are more likely than other types of businesses to close down if one or more family members fall ill.
Many Black Americans still strive to own a successful business despite the many setbacks they have experienced. Small business owners who succeed in their endeavors report high satisfaction. “Pursuing a passion” was the top reason for Black Americans to start a business.
In recent years, there has been a significant rise in Black women who own small businesses. Black-owned companies are more likely to have a community focus. The top industries for Black firms include health care and social services. Black businesses, such as repair and maintenance, retail, and other types of business, often contribute to the local economy by boosting the economic activity in their neighborhoods. If Black-owned companies are given the necessary support, they can be engines of economic growth in their communities.
The health and success of Black-owned business is essential to the Black community and the nation. What can be done to encourage Black entrepreneurs to start businesses? How can we support these businesses to ensure that they thrive?
- Firstly, there is more to do to ensure that Black entrepreneurs and Black businesses have the same access as other businesses to funding and network opportunities. Encouraging and supporting legislation that guarantees equal access to all companies is essential. Also, it’s necessary to publicize the existing opportunities better. Also, more funding is needed for Black entrepreneurs and mentorship opportunities. It is also required to impose harsher penalties on banks and other institutions that are discriminatory in lending to Black-owned small businesses.
- Second, there needs to be more significant support for Black-owned businesses at an individual level. Sites such as Okra, Official Black Wall Street, or We Buy Black can help consumers find local businesses. Social media and online review sites like Yelp are great ways to boost a business’ marketing. Making a concerted attempt to support Black businesses in your local community or online will make a difference to the business owner and their community.
