Underserved populations may have special needs for business capital, and yet often find it notably harder to acquire. What to do in that case? Depending on the venture, finding government grants for small business could be a major challenge for some. The Census Bureau recently published its Annual Survey of Entrepreneurs, showing some important trends worth considering.
The Wall Street Journal recently looked at the results from this data and the trends they suggest. According to this collation, 26 percent of African-American business owners didn’t seek funding that year, even though they needed it.
Looking at the results, the number stands in high contrast to other demographics: Just 15 percent of Hispanic, 10 percent of Asian and 9 percent of white owners fell into the same category. The source also said that African-American owners only accounted for just over 2 percent of U.S. businesses total at the time.
The Journal also quoted Alicia Robb, senior fellow of the Ewing Marion Kauffman Foundation, stating that even owners in this group with highly favorable credit ratings have high loan denial rates. With many owners unsure they will achieve funds, there seems to be less drive to seek out opportunities to begin with.
“With many owners unsure they will achieve funds, there seems to be less drive to seek out opportunities to begin with.”
This need for good sources of capital for African-Americans is also clear in the amount of their own funds that owners often contribute. The same data said that the median amount of funds white owners self-donated was more than $55,000 less than that for African-American owners.
Female owners: Challenges and opportunities
Another report shows the possibilities that could await entrepreneurs of color in the new years. A report co-commissioned by the Small Business Administration’s Office of Advocacy and the National Women’s Business Council recently identified several different ways to develop the African-American women’s business scene, including sharing resources, developing community programs and making it easier for participants to network.
Similar to the Census statistics, this report also found some factors preventing African-American women from seeking out financial resources. Specifically, this group reported that there was “fear and risk” surrounding the quest for enough business capital, believing that they might not gain approval for their loans or deride their own efforts during the process.
Other concerns for women business owners of color include too few alternative resources and a general lack of access in certain instances, denying them a chance to try. The Summary of Key Findings added that fear continues to dictate business decisions for this community, as it faces discrimination, stereotyping and the lack of a supportive community.
So what opportunities are there? The report suggested alternative financing as well as a need to seek out diverse collaborators. Though it acknowledged the broader shifts that need to take place, such as more female investors, the authors also referenced the important role that community actors need to fill.
Community Development Financial Institutions, Minority Business Development Centers and other options also work as possible resources. As already stated, accessibility is key, with more support available to business owners with an easy way to discover capital. Preparing and developing business professionals through education also matters, however.
What Growth Capital offers
For African-American owners who need this capital support within Ohio, Growth Capital has multiple programs that could be in their favor. Our Community Advantage offering, in particular, has led to the majority of its lending reaching underserved markets. With a maximum loan size of $250,000, this could allow applicants to tackle various business-related expenses going forward and create a strong base.
Last year, Growth Capital was the Number One Community Advantage Lender in the Midwest: read this report to find out more.