In Arizona and across the country, Black business owners still lag in access to financing and capital to grow their businesses, a new study from the Alliance for Entrepreneurial Equity shows.
According to the study, about 40 percent of Black-owned businesses have been denied loans, lines of credit or cash advances when seeking funding, compared with only 18% of white-owned businesses. That has meant Black entrepreneurs have turned to less traditional manners of funding, such as financial technology and online lending companies, as well as community development financial institutions.
In Arizona, organizations are aiming to boost access to capital for Black- and minority-owned businesses through microlending or private equity and venture capital investments, according to the 2023 State of Black Business Report, produced by the Greater Phoenix Economic Council, the Black Chamber of Arizona, JP Morgan Chase and SRP.
Arizona has about 1,200 Black-owned businesses that employ multiple people, but the lion’s share of Black-owned businesses in Arizona are sole proprietors, meaning the owner of the business is the only employee, Imani Augustus, Director of the Alliance for Entrepreneurial Equity, said, citing data from the U.S. Small Business Administration. Arizona has about 30,000 sole proprietorships run by Black business owners.
“This is a policy opportunity to secure greater investment for people to grow their businesses,” she said.
In March, Black Chamber of Arizona CEO Velma Trayham said one of the organization’s pillars will be capital access and capital readiness, to educate people about the underwriting process and partner with financial institutions to build a venture fund to help connect Black business owners with capital.
Black-owned businesses cluster in certain sectors in Arizona and elsewhere in the country.
“Arizona Black-owned businesses are most strongly represented in personal services, food services, home-based consumer product manufacturing and retail trade — industry sectors that tend to have relatively lower financial and technical barriers to entry,” authors of the State of Black Business Arizona report wrote. “This is unsurprising considering the unique challenges around access to capital that this business demographic has historically faced.”
Augustus said those industries are similar to trends across the country for Black entrepreneurship.
The Alliance for Entrepreneurial Equity, which was formed in 2022 to encourage the economy to recover in an equitable way, is working on a national policy platform to encourage Black and minority entrepreneurship. The main pieces of the platform are expanding access to new markets, access to capital and developing entrepreneurs, Augustus said.
Those ideas mirror plans in Arizona, laid out by Trayham, who began the position in mid-March. Trayham outlined her priorities for the organization at an event in March to introduce herself as the new leader of the organization.
“I believe entrepreneurship is the engine to eliminate poverty,” Trayham said at the event.
Trayham said some of the focus areas for the Black Chamber will include growing access to contracting opportunities, which still lag for minority-owned businesses. According to the Alliance for Entrepreneurial Equity study, Black-owned small businesses nationwide only received about 1.6% of federal contracting dollars available in 2022.
Reach the reporter at cvanek@arizonarepublic.com. Follow her on X, formerly Twitter, @CorinaVanek.