August is National Black Business Month and with the current state of Black Businesses, re-opening and transitioning with COVID still rampant, we wanted to share our thoughts.
When most people think about African-American-owned businesses, particularly small businesses, they’re looking at them with misguided facts and inaccurate information. African-American businesses have a disproportionately higher failure rate than those of other minorities or Caucasian-owned establishments.
Making the decision to embark on any business venture is certainly risky. Regardless of how solid the research, business planning, financial backing, and other preparations are, there are always those unfortunate, unforeseen events that occur. It’s impossible to factor everything into the equation. Overall, 20% of all businesses fail within the first year. About 50% make it to the 5-year mark, and 62% survive and make it to be a decade old. For African-American businesses, the statistics can be even gloomier. Eight out of ten Black-owned businesses fail within the first 18 months. https://tjn.com
Covid-19 has exacerbated many issues facing the Black community, and there are glaring disparities between African-American and Caucasian entrepreneurs. Funding is a major issue for African-American business owners. There are several grants for Black-owned businesses. Black entrepreneurs should research and apply for whichever grants they feel they are most likely to get. Other options for funding include crowdfunding, angel investors, and loans. It will probably take a combination of funding options to fully fund your business.
Crowdfunding is the use of capital from a large number of individuals to finance a new business venture. Depending on the type of crowdfunding, investors either donate money altruistically or get rewards such as equity in the company that raised the money. The key takeaway here is that successful crowdfunding companies provide resources that help campaigns reach their funding goals. Kickstarter, GoFundMe, LendingClub, Indiegogo are some of the most reputable and successful. Each crowdfunding site has specific rules and prohibitions. It’s wise to research the sites thoroughly prior to making a commitment. Crowdfunding isn’t easy or a free way of making money. It takes a lot of thought and effort to establish what a project backer will perceive as a valuable service, www.businessnewsdaily.com
Grants are funds given by an entity – frequently, a public body, charitable foundation, or a specialized grant-making institution to an individual or another entity for a specific purpose linked to public benefit. Unlike loans, grants aren’t to be paid back. A grant is one of the ways the government funds ideas and projects to provide public services and stimulate the economy. Grants support critical recovery initiatives, innovative research, and many other programs. You can find a list of projects supported by grants in the Catalog of Federal Domestic Assistance (CFDA). www.usa.gov>Grants
In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etcetera. The recipient incurs debt and is usually liable to pay interest on that debt until it is repaid, as well as, repay the principal amount borrowed. Loans can be secured or unsecured. Secured, meaning there is collateral attached such as a mortgage; unsecured as in a credit card. A good place to start would be by contacting the Small Business Administration (SBA). sba.gov
PPP Loans were available during the pandemic, and many eligible African-American small businesses applied though few succeeded in securing the loans. Recently released statistics prove that the majority of the PPP Loan funding went to Caucasian small businesses and or large corporations.
The question is, “How do African-American entrepreneurs level the playing field after years of generational systemic racism?” There are a number of factors that should be considered. The first consideration should be African-American consumers supporting African-American businesses. How do we do that? Easily, by making a solid commitment to patronizing Black businesses whenever and wherever possible. For example, my dry cleaners is a Caucasian-owned establishment that has a tailor on the premises. There are no Black-owned dry cleaners in my vicinity, and this place has reasonable prices and does an excellent job handling my wardrobe. However, I recently discovered that there’s an African-American tailor right here in my city, and even more exciting she’s a woman. Needless to say, I’ve committed to exclusively taking my tailoring business to her. Unfortunately, unless Black people devote more time to wealth building within their own communities, they’re always going to be behind. African-American’s spend less money in African-American-owned businesses than other racial and ethnic groups, including Hispanics and Asians. Blacks have trillions of dollars in spending power, yet only a fraction of those dollars are actually spent in Black businesses. www.nytimes.com
Secondly, there’s the misconception that because it’s a Black-owned business, the product or service is prone to be substandard and/or inconsistent. It’s been my experience that Black entrepreneurs are just as likely to have the same pride in their businesses as their Caucasian, Hispanic, Asian, and other counterparts.
Lastly, African-American entrepreneurs need to see the advantages of Community involvement and advertising as a way of leveling up…as an investment in themselves. According to the ANA’S report, Black-owned businesses are at the bottom of the list when it comes to advertising and marketing spending, representing just 10% of the suppliers receiving the most spending. This puts Black-owned businesses behind women-owned businesses (62% diversity supplier spending), Hispanic-owned businesses (11%), and small businesses (11%). https://business.linkedin.com
African-American businesses need to start making our business entities a priority in our communities, in order to secure a seat at the table.
