Editorial Note: Opinions and thoughts are the author’s own and not those of AFROTECH™.
In today’s rapidly evolving economy, equitable policies that support Black-owned and minority-owned businesses are not just a moral imperative, but a necessity for national growth. Despite their resilience and innovation, systemic barriers continue to block the full potential of these businesses. From access to capital to securing federal contracts, the current policy landscape often fails to reflect the challenges minority entrepreneurs face. To foster real economic progress, we must push for comprehensive policy changes that promote equity and empower these businesses to thrive.
Black-owned businesses account for about 2.2 million firms, contributing $150 billion to the U.S. economy. Yet, they still face significant obstacles, particularly in securing financing. Research from the Federal Reserve shows that Black and minority entrepreneurs are disproportionately denied loans. Black entrepreneurs face denial rates as high as 20%, compared to 9% for their white counterparts. This inequity in access to capital not only limits the growth of individual businesses but also contributes to the economic disparity in minority communities.
Federal procurement policies also fall short in supporting minority businesses. The U.S. Small Business Administration (SBA) reports that Black-owned businesses receive just 1% of federal contracting dollars, a strikingly low figure that underscores the need for targeted policy reform. This issue is particularly glaring given that federal contracts have helped provide exponential growth for majority firms and can be a critical tool for minority entrepreneurs seeking to grow their businesses.
In a step towards addressing these disparities, the White House announced new measures on January 25, 2024, to bolster small business participation in the federal marketplace. This initiative is a positive sign, with the administration setting ambitious goals to increase the share of federal contracting dollars awarded to small disadvantaged businesses to 15% by 2025. This policy shift follows a significant $62 billion in federal contracts awarded to small businesses in fiscal year 2022, a record achievement. But for Black- and minority-owned businesses to fully benefit from such programs, there is more work to be done, especially in ensuring they can compete on equal footing.
One key way to enhance participation is through a nationally recognized Black-owned business certification. The U.S. Black Chambers, Inc. (USBC) developed the ByBlack Certification, which not only identifies Black-owned businesses but also facilitates their entry into local government,federal and corporate contracting opportunities. We are advocating for the U.S. Small Business Administration (SBA) to adopt the ByBlack Certification as the standard for contracting with Black-owned businesses. With a national certification, governments and corporations at all levels can more easily navigate the marketplace and support Black-owned businesses. This certification would help meet the administration’s target to significantly increase minority participation in federal contracts.
Beyond certification, policy changes must include reforms to address the longstanding issues around access to capital. Congress and the SBA should expand programs like the 7(a) loan program and increase investment in Community Development Financial Institutions (CDFIs), which primarily serve minority communities. Financial institutions should also be held accountable for lending practices that demonstrate inherent bias and disproportionately affect minority entrepreneurs. Increasing minority access to affordable capital will give these businesses the resources needed to compete and succeed in the federal marketplace.
Engaging with policymakers is essential to advancing these reforms. Ron Busby Sr., President of the U.S. Black Chambers, Inc., underscores the significance of policy-driven support: “When we create pathways for Black-owned businesses to thrive, we not only uplift those businesses but also strengthen the entire U.S. economy.” Policymakers are beginning to recognize the need for change, with the White House’s recent announcement highlighting the importance of minority business participation in federal contracts. The plan to raise federal contracting goals for socially and economically disadvantaged businesses to 15% demonstrates the administration’s commitment to dismantling barriers that have historically limited minority entrepreneurs’ success. Other reforms, such as enforcement for federal procurement goals and ensuring accountability for meeting these targets, will be critical in expanding opportunities for minority businesses.
Currently, the federal government mandates that at least 10% of all contracting dollars go to disadvantaged businesses, but this goal is often unmet. Raising this minimum threshold and holding agencies accountable will help ensure that minority businesses, particularly Black-owned enterprises, receive their fair share of federal contracting opportunities. Advocating for change is not just the responsibility of policymakers. It requires a united front of business leaders, advocates, and community members working together to ensure the success of Black- and minority-owned businesses. The push for broader access to capital, a national certification for Black-owned businesses, and an increase in federal contracting goals is just the beginning. Together, we can create an economic landscape where minority entrepreneurs are empowered to succeed, ultimately contributing to the vitality of the U.S. economy. To learn more about the U.S. Black Chambers, Inc., access valuable resources, and explore membership opportunities, visit www.usblackchambers.org
To join the ByBlack Directory & Get Certified at no-cost, visit www.byblack.us
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Alicea Gay is the Vice President of External Affairs & Certification at U.S. Black Chambers, Inc.