When we celebrate the contributions of Black business owners and entrepreneurs, it pays homage to them and their legacies. In August we celebrate "Black Business Month" and acknowledge the importance of Black-owned businesses when it comes to contributing to the nation’s overall economy.Yet we all know that acces to capital plays an important role in one's ability to grow and scale up.
Denise Moore, CEO of the Black Business Alliance in Peoria, Illinois, has this to say about the importance of Black Business month: “Black Business Month is exciting because it gives us an opportunity to focus on a community that is far too often underrepresented when it comes to access to capital and opportunities to build wealth.”
Even when controlling for factors such as “firm characteristics and performance,” Black-owned businesses are still 20 percent less likely than white-owned businesses to obtain a loan from a large bank.
According to the Federal Reserve, a whopping 37.9% of Black business owners said that their primary reason for not applying for a loan was that they were “discouraged,” meaning they believed they would be turned down for a loan even if they applied. Compare that to just 12.7% of white business owners who felt the same.
National Black Business Month was started in 2004 by John William Templeton at left, and Frederick E.Jordan, Sr. (Pictured at bottom left).
The purpose was to highlight and focus on the needs of more than two million Black-owned businesses operating across America.
This stemmed from Jordan’s own personal experience of the struggle to gain financial backing and funding when he began his own firm in San Francisco in 1969.
Although some progress has been made to better support and advocate for Black-owned businesses in the United States, there is still much more work to do.
While generating over $150 billion in revenue, according to the U.S. Census, Black business owners account for only about 10 percent of all U.S. businesses, with an even smaller percentage of products from Black-owned brands on store shelves. However, championing Black businesses isn’t just about the bottom line. It also involves advocating for racial equality and social justice so that Black business owners, who have struggled for centuries to overcome obstacles, can finally achieve the holistic, sustainable entrepreneurial success they deserve. This advocacy allows for access to training, educational tools and support networks, in addition to funding.
Why the need for funding is critical?
Cash flow issues are a major culprit in the failure of Black-owned businesses. Businesses with a positive cash flow have the required operating funds to settle debts, pay employees, reinvest in the business, etc. The lack of suitable resources, lending channels and well funded financial supporters often force Black-owned businesses to start much further behind than non-Black-owned businesses. They also often take much longer to develop investment channels forcing a slower growth trajectory, and therefore limiting the businesses financial ability to reinvest into the community as well as other Black owned businesses in their supply chain.
When Black-Owned Businesses are in high demand, the companies become more profitable. Supporting these businesses contributes to creating entrepreneurial opportunities. Entrepreneurship fuels economic prosperity and serves as a bridge for families to improve their financial position and create the environment they want for themselves.
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