LendingTree, an online lending marketplace, released a study in which Maryland and the District ranked high regarding thriving minority businesses.
Using the U.S. Census Bureau definition of minority-owned businesses (those with majority ownership by someone with any race and ethnicity combination other than non-Hispanic and white), the study analyzed metrics, including the percentage of minority-owned businesses and the pay ratios of these companies compared to all businesses. Maryland and the District occupy the top three spots in our study, while Iowa, Idaho and Rhode Island are at the bottom.
Minority-owned businesses thrive the most in Maryland, according to the study. The state finishes in the top 10 with minority-owned businesses paying employees the fourth-highest relative to all businesses.
Over a quarter (25.4%) of companies in Maryland are minority-owned, the sixth-highest share in the U.S. Additionally, the state scores high for the longevity of its minority-owned businesses.
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In fact, 56.6% in the state have operated for at least six years, the 10th-highest across the country. 2020 Census data shows Maryland is one of the country’s most racially and ethnically diverse states, behind only Hawaii, California and Nevada.
According to Pew Research Center, Black-owned employer businesses in Maryland make up the most significant share of classifiable companies (8%) in the state. While Maryland’s diversity is reflected in the makeup of its small businesses, less than half of the state’s minority-owned companies (47.8%) earn revenues of at least $500,000, earning 16th for that metric.
Additionally, the number of minority-owned businesses in Maryland only grew by 6.5% from 2020 to 2021 (the latest data available), landing 30th for that metric.
Maryland has multiple statewide and community initiatives to support and improve the outcomes of minority-owned businesses, including the Minority Business Enterprise Program, the Maryland Small Business Development Financing Authority and TEDCO’s Social Impact Funds.
Further, Maryland has the sixth-highest percentage of businesses that are minority-owned and the 10th-highest rate of these businesses that have operated for at least six years.
The District joins the top three.
The nation’s capital follows Maryland in the analysis of where minority-owned businesses are thriving.
Over a quarter (28.6%) of the District’s businesses are minority-owned, the fourth-highest share. The District also scores high for longevity — 60.2% of its minority-owned businesses have been around for at least six years, the sixth-highest rate.
Over half (50.4%) of the District’s minority-owned businesses earn $500,000 or more in revenue, the ninth-highest share. Though not a state, like Maryland, the District is one of the country’s most diverse locales.
According to Pew Research Center, Black-owned employer firms make up the District’s largest share of classifiable businesses (15%), helping it earn first in our study of where Black Americans thrive the most. D.C.’s Department of Small and Local Business Development operates multiple initiatives designed to remove the barriers to entrepreneurship for small business owners in the area.
Iowa ranks last in the study, with bottom-10 rankings in two metrics. The Hawkeye State has the seventh-worst rate of minority-owned businesses in the country (5.1%). While most states saw gains in minority-owned companies between 2020 and 2021, Iowa lost 2.5%, also the seventh worst.
According to Fed Small Business data, the number of active small businesses nationwide declined by 22% from February to April 2020. However, minority-owned businesses fared much worse.
Black-owned small businesses declined by 41%, Hispanic-owned companies dropped by 32% and Asian-owned firms decreased by 26%. Contrast that to the 17% decline of white-owned companies.“One of the biggest challenges minority-owned businesses face is a lack of access to funding,” LendingTree chief credit analyst Matt Schulz explained. “When you make a smaller salary or are less able to access credit, it significantly hamstrings your ability to start or grow a business.”