Key takeaways
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Black-owned businesses in the U.S. employ more than 1 million Americans.
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Studies show that Black entrepreneurs face more challenges than their white counterparts to secure the capital they need. This is true, even if they have a stronger credit profile.
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Black-owned businesses play an essential role in reducing the racial wealth gap.
Minority-owned businesses are those that are at least 51 percent owned, operated and controlled by a minority group. Black- and African-American-owned businesses fall under this umbrella.
Unfortunately, the racial wealth gap and systemic racism in the U.S. have long made it more difficult for Black entrepreneurs to thrive. Despite these challenges, the number of Black-owned businesses in the U.S. has continued to grow. Today, they employ over 1 million Americans nationwide.
Black-owned business statistics
Key statistics
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There are over 161,000 Black-owned businesses in the U.S., according to the Census Bureau.
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Black-owned businesses employed 1.4 million employees in 2021.
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Black-owned businesses made up about 3% of U.S. firms that can be classified by the owners’ race or ethnicity in 2021.
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Nearly one-third of Black-owned businesses in the U.S. are in the healthcare and social assistance fields.
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39% of Black-owned businesses were owned by Black women in 2021, while men owned 53%.
The importance of Black-owned businesses
Black-owned businesses are essential to our nation for a number of reasons.
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According to a study by Brookings, minority-owned businesses — including Black-owned — are more likely to report that their neighborhood is the site of most of their transactions. They’re also more likely to hire people of color compared to non-minority-owned businesses.“The cultural impact is that you find less crime, greater synergy and all the good things that come when businesses are growing and giving back to their communities,” Larry Ivory, president and CEO of the Illinois State Black Chamber of Commerce, says.
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Despite the overall growth of Black-owned businesses, the racial wealth gap in the U.S. remains staggering. Data by the Federal Reserve shows that, on average, Black households have 77 percent less wealth than white households.Promoting Black-owned businesses is important in reducing the racial wealth gap and creating job opportunities for people of color.
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Many large corporations have committed funds to support Black communities and businesses. The problem, however, is that they often lack diversity. This creates a disconnect between their business and the communities they’re trying to help.“You cannot have a thriving community without thriving businesses, and it needs to be people that look like you,” Ivory says. “If everybody else looks like somebody else, how are you going to inspire the youth and others to become entrepreneurs and do things when they have no signs of success?”“We have to be very intentional to shift that,” he adds. “And to really scale up Black businesses and other minority businesses to make sure we’re not creating a greater trade deficit in our home communities, as this makes America less competitive globally.”
Common challenges among black entrepreneurs
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Only 5 percent of Black Americans hold some business equity, compared to 15 percent of white Americans.
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Even with a strong credit profile, Black entrepreneurs are about half less likely than their white counterparts to secure full financing.
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Black entrepreneurs start their businesses with an average of $35,000 of capital. White entrepreneurs start their businesses with an average of $107,000 of capital.
Black entrepreneurs face more challenges qualifying for business loans. This is largely due to the generational racial wealth gap and institutional racism.
“One of the biggest and greatest challenges that African American business owners face is not getting access to the capital they need,” Ivory says. “Cisco data points out the fact that Black people get turned down at a much higher rate than Caucasians, even with the same credit scores and same factors being considered,” he adds.
Data by the Federal Reserve shows that Black business owners have a harder time securing funds for their businesses than white business owners. On average, 35 percent of white business owners received all the financing they applied for, compared to 16 percent of Black business owners.
Another study found that banks offer Black entrepreneurs less favorable loans than those offered to their white counterparts, even if they are better qualified.
Funding resources for Black-owned businesses
There are several financing options Black entrepreneurs can explore to help fund their ventures, including the following:
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Business loans and lines of credit: Black business owners who need capital may consider taking out an installment loan or line of credit for business purposes. Microloans and business lines of credit are great options for new business owners just starting off. These loans allow you to take out a smaller amount to ensure you do not overborrow and get into debt.
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Coalition to Back Black Businesses: This organization provides grants and other financial resources for Black-owned businesses. Its Enhancement Grant grants $25,000 to 20 Black-owned small businesses each year.
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Community Development Financial Institutions Fund (CDFI): This fund is backed by the U.S. Treasury Department and consists of financial institutions like banks, credit unions, loan funds, microloan funds and venture capital providers. These institutions provide government-backed loans to businesses in low-income communities.
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Grants.gov: This is a database of all federal grant programs for businesses. It contains grants from every eligible U.S. agency.
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Minority Business Development Agency (MBDA): The MBDA is an agency backed by the U.S. Department of Commerce that promotes the growth of minority-owned businesses. This agency connects entrepreneurs with resources to find capital.
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Minority business certifications: If you get your business certified with the NMSDC, you can access networking opportunities and other resources the organization provides.
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The National Association for the Self-Employed (NASE): This organization offers microgrants up to $4,000 for association members.
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Private equity firms: Private equity firms are investment management companies that invest in and support the growth of companies. Several private equity firms seek to specifically work with small minority-owned businesses. Backstage Capital, for example, works specifically with women, people of color and members of the LGBTQ+ community.
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The USDA Rural Business Development Grant Fund: This grant program is specifically for small businesses in rural areas. This program aims to bolster small businesses to improve rural communities.
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U.S. Small Business Administration (SBA): The SBA is a U.S. government agency that provides financial support for small U.S.-based businesses. Their lender match program can match you with a loan or investment capital to meet your business needs. Besides that, the agency has listed different resources available specifically to Black business owners in commemoration of Black History Month.
That said, these options are just a few of the resources available. If you are a Black business owner or entrepreneur looking for capital, make sure to do some research and see if any loans or grants in your area fit your needs.
How to support Black-owned businesses
If you are looking for ways to support Black-owned businesses in your area, here are some things you can do as a consumer.
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Budget money with a purpose for spending on Black-owned businesses: If you want to consistently support Black-owned businesses, set aside a set amount of money each month specifically to spend at Black-owned stores and restaurants.
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Promote on social media: If there are Black-owned businesses you enjoy doing business with, it is worth promoting the business on social media. Word of mouth is a great way to bring in business, and supporting a business on social media is likely to help them bring in more profit.
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Shop local businesses: The best way to support Black-owned businesses is by patronizing those businesses. If you know of any Black-owned businesses in your community or online, try to shop there first. If you need help finding Black-owned businesses, Black Owned Everything is a centralized database of Black-owned businesses.
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Write reviews and online suggestions: Reviews mean a lot to small businesses, and writing positive reviews is a great way to support a Black-owned business you love. Consumers often rely on reviews when choosing a business, and more positive reviews can increase a business’s online visibility.
The bottom line
Black-owned businesses are important to their communities and the U.S. economy. There are structural barriers in place that make it harder for Black-owned businesses to thrive, but there are resources available that can help combat these obstacles.
Financial support for Black-owned businesses is a critical part of closing the racial wealth gap in the U.S. It is vital that government agencies and corporations invest in Black businesses and communities, not just for Black business owners but for the country at large.