There are more than three million small businesses owned by Black and African American entrepreneurs in the United States with annual sales totaling over $150 billion. However, in 2020, Black and African American business ownership rates dropped 41% between February and April 2020, the largest rate of any racial group. Historically, Black and African American entrepreneurs have faced systemic barriers to success like lack of access to capital, fewer business mentorship opportunities and a general lack of business opportunity. Over the past few years, these historic inequalities have combined with hurdles that have been heightened by the pandemic.
As we celebrate Black History Month in Idaho, it is as important as ever to acknowledge these ongoing challenges faced by the Black and African American business community and consider solutions to help shift the landscape for better equity and prosperity.
Access to capital
Access to capital remains a top challenge. According to the Census Bureau’s Annual Business Survey (ABS) and the Federal Reserve’s Small Business Credit Survey (SBCS), only 35.7% of Black-owned businesses received all the credit they requested compared to 57.6% for white entrepreneurs. Making more credit options available to diverse business owners can be the difference between a business’s survival and its closure. In addition to traditional lending, working with Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) can create an ecosystem of support that provides additional avenues to accessing capital. These institutions specifically work with underserved populations, including those in low-to-moderate income areas and minority populations.
Supporting these organizations and their mission is at the heart of the creation of our bank’s Open for Business Fund, an effort that has donated roughly $420 million to support nonprofits who serve small businesses, and the Small Business Resource Navigator. No matter what stage or circumstance your business is in, resources are available to help you achieve your goals.
Access to information and mentorship
Another known challenge among business owners is where to find trustworthy information and mentorship. According to a regional survey, less than 40% of Black and African American entrepreneurs had sufficient access to mentors and support networks to help launch and scale their business.
The path forward
As progress continues to be made toward solving the issue of improving access to capital and access to information and mentorship, long-term resiliency planning is also a critical step in order to help diverse small business owners find ways to pivot their business models and reimagine their products and services so they can meet the needs of an evolving economy. These actions, coupled with more equitable access to capital and information, can accelerate the recovery of the wider small business ecosystem, creating numerous pathways for entrepreneurs to seek the help they need.
By working together, communities, financial institutions and business owners in Idaho can continue to move toward a more equitable landscape where business owners can thrive and prosper.
— Randy Riley is a lead business growth strategy consultant and segment influencer for Wells Fargo in Idaho.