Frustrated with uncertainty in the workforce, an increasing number of Black employees are opting to start their own companies. However, studies show while Black entrepreneurs who opt to work for themselves may think they are avoiding prejudice, racism still tends to rears its ugly head. According to a story by National Newspaper Publishers Association (NNPA) writer Freddie Allen, a Gallup study, commissioned by Wells Fargo, showed Black business owners faced significant challenges obtaining funding.
Allen said most African American business owners were using their own money to keep their companies running. He wrote, “Nearly half (47 percent) of Black-owned businesses operate in the South and the study found that 77 percent of Black business owners use personal cash to finance their businesses.”
Not only did Black entrepreneurs rely on self financing to keep their businesses afloat, they also had a harder time obtaining business credit. The report stated, “Twenty-two percent of African American business owners say they felt that discrimination from a financial institution based on their race, ethnicity, gender or sexual orientation had impacted their chances to obtain credit for their business. Among those who indicated they needed credit, African American owners, in particular, say they were not able to get all the credit they needed.”
The data also showed other ethnic groups were able to obtain credit at higher rates than African Americans.
“According to the report, 13 percent of Black business owners obtained the credit they needed, compared to 20 percent for Hispanic owners, 24 percent of Asian owners and 23 percent of owners in general,” wrote Allen. “The highest rejection rate – 38 percent – was among Black business owners seeking a loan of at least $250,000; 17 percent of Blacks seeking a loan less than $50,000 were rejected. By comparison, 33 percent of Asian owners were turned down for larger loans and 14 percent for smaller ones. For Latino business owners, the rejection rate was 26 percent for large loans, and 15 percent for smaller ones.”
Wells Fargo realizes Black entrepreneurs often have a hard time getting funding and is committed to helping more African Americans business owners access working capital.
“For this reason, we commissioned the Gallup study, which gave us new insight into the perceptions and experiences of diverse business owners working with banks, and how we can improve as a company and as an industry,” said Lisa Stevens, the head of small business for Wells Fargo. The bank said its commitment to help minority entrepreneurs includes a four-point plan including more education and credit coaching and “$75 million in grants and investments in micro-lending programs aimed at diverse business communities.”
Jon Campbell, executive vice president, government and community relations for Wells Fargo confirms this idea.
“We know that in order to address the range of financial needs within all of our communities, we need to support and work with the ecosystem of organizations that serve small businesses,” he said. “Through this increased investment and connections with community lending organizations, we are making meaningful strides toward increasing access to capital for small businesses, as well as helping more business owners get the coaching and educational resources they need to succeed financially long-term.”
However, there are other ways for African Americans to finance their business ventures. Black Enterprise recently listed 10 grants available to Black entrepreneurs. These include Small Business Administration grants, funds provided by the Minority Business Development Agency and privately-operated grants by companies such as Miller Lite and FedEx.
“Real business grants do exist. In fact, hundreds of Black and minority-owned businesses each year receive such grant funding from various government agencies and nonprofit organizations, reports BlackNews.com,” according to Carolyn M. Brown, Black Enterprise writer. “Such funds do not have to be repaid, but must be used to either start a new business or enhance an existing one. Others can be used for innovation research.”