The Impact of Black Owned Businesses in America
Written by Shatoya Cobb, CommunityWorks Business Coach
Considering the institutionalized barriers that prevent access to privileges readily available to the majority, you must admire the resilience of Black businesses in America.
At nearly every juncture, there’s a challenge or hurdle that must be scaled. In the corporate world, there is a glass ceiling preventing Black professionals from advancing, evidenced by the fact that only 1% of all Fortune 500 companies’ CEOs are African American. Tired of the constant struggle for recognition, many Black professionals turn to business ownership. After all, what could be better than being your own boss?
Unfortunately, minority business owners fare little better. Only 4% of Black-owned businesses survive the start-up stage, even though 20% of Black Americans start businesses. This is due in large part to the difficulty Black business owners have in accessing financing. According to a report by McKinsey & Company, titled “Building Supportive Ecosystems for Black-Owned US Businesses,” Black entrepreneurs are three times more likely than white entrepreneurs to say that a lack of access to business capital negatively affects the profitability of their business.
Despite all these challenges, the rate of Black women venturing into business ownership is on the rise. Black women are starting or running new businesses at a higher rate (17%) than white women (10%) and white men (15%). 61% of these women are even self-funding their businesses. After the pandemic pushed 41% of Black-owned businesses in the US into closure in 2020, the number of Black businesses in operation increased by 38% in 2021.
Community Development Financial Institutions (CDFI’s) like CommunityWorks were created to allow the underserved to obtain access to capital through creative financing. CommunityWorks has developed lending products that allow individuals to access capital no matter where they are in their business journey. Learn more about the lending products here. CDFIs also offer a human underwriting approach that looks deeper than a credit score and personalized business coaching.
When black businesses receive proper funding and support, the impact is massive. In fact, according to the McKinsey & Company report, healthy black-owned businesses could be critical for closing the Black-white wealth gap.
The result of bridging the wealth gap means more jobs and increased income for everyone in our communities, which results in:
- An increase of family income – increasing the cash flow a family receives from entrepreneurship or the labor market.
- The ability to build family wealth – increasing the net value of a family’s pool of financial and non-financial assets.
- The ability to add to family savings – increase of tools and benefits that are accessible to families, to turn income into savings and wealth for families and the community.
The positive impact on our communities and families with the influx of the wealth generated as a result of Black-owned businesses no longer needs to be left to the imagination. Supporting and promoting the work of CDFIs like CommunityWorks will help dreams become reality.