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Black women leading in business, but lack access to capital

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in brief

  • Harvard Business Review recently highlighted research conducted by Babson College and the Global Entrepreneurship Monitor on entrepreneurship rates and attributes in the United States.
  • In the U.S., 17% of Black women are in the process of starting or running new businesses compared to just 15% of White men and 10% of White women. However, the same survey found that only 3% of Black women are running fully mature businesses.
  • To explain this drop off, researchers point to a lack of access to capital for Black women, and the business implications of this reality. For example – 61% of Black women self-fund their total start-up costs. However, just 29% of Black women entrepreneurs live in households with incomes over $75,000, compared to 52% of White men. The uneven distribution of resources needed to start a business reinforces the success of White entrepreneurs while holding entrepreneurs of color back.
  • One way to bridge the gap between start-up and business ownership rates amongst Black women is by educating the financial sector on these disparities, improving finance practices and setting guidelines to ensure racial equity in funding entrepreneurs.

why this matters

The COVID-19 pandemic continues to bring additional challenges for Black- and women-owned businesses. According to a national poll conducted by Small Business Majority, within the last year about one-third of businesses owned by people of color (32%) have cut employee hours and 24% have temporarily closed their doors. Of those who reduced staff at the height of the downturn last year, 60% have not restored their headcount to pre-pandemic levels.

Resources available to business recovery have also been unevenly distributed. A recent University of Michigan study found that non-Black business owners were 30 times more likely to receive federal relief money than their Black counterparts.

These trends threaten opportunities for Black women to start successful businesses and will continue without meaningful intervention from the government and the financial services sector to uncover and address gaps and biases in entrepreneurial ecosystems.

the opportunity

WKKF supports women entrepreneurs and entrepreneurs of color through a variety of investments, programs and funding strategies. A few examples include:

  • Association for Enterprise Opportunity (AEO)—with funding support from WKKF—launched a trusted technical assistance program to help Black-owned, small businesses grow and create jobs in low-income communities using scalable and technology-centric solutions. AEO is deliberate about advancing racial equity as a strategy for economic growth, and not just as a matter of social justice. “It’s a combination of the right fit capital and pairing it with trusted guidance. That is what helps business owners succeed,” said Connie Evans, AEO’s president and CEO.
  • Last year, WKKF and McKinsey & Company to co-published a report including steps the financial services sector can take to advance racial equity within the industry.
  • In 2015, WKKF launched the Entrepreneurs of Color Fund which is administered by Detroit Development Fund, and to date has loaned more than $10 million to entrepreneurs throughout Detroit, 55% of whom are female.

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