August is National Black Business Month, a perfect time to celebrate and support Black-owned businesses in the U.S. As business owners, people of color can establish financial independence for themselves and their families, and provide employment opportunities for others in their community.
Moreover, small business owners contribute to the health of the local economy by paying taxes that go into city and state coffers. When they occupy retail space, neighborhoods become more dynamic.
Starting a venture and then keeping it going is no easy feat, however. A substantial number of small businesses don’t make it past a few years, and Black business owners tend to fare worse. The Federal Reserve 2021 Small Business Credit Survey found that while most owners experienced financial hardship during the pandemic, the highest rate, at 92 percent, was reported by Black business owners.
Throughout the years, Black business owners have faced a myriad of hurdles, based on both overt and covert racism, with some biases continuing today. Given the disparity, you may want to help. Here’s how.
Key takeaways
- 18.7% of U.S. employer businesses are minority-owned (U.S. Census Bureau 2020 Annual Business Survey)
- 13.6% of the U.S. population is Black or African American (U.S. Census 2021 Quick Facts)
- There are 3.12 million Black-owned businesses in the U.S. (2022 Brookings Institute report)
- 46% of all Black entrepreneurs are women (2021 Guidant Financial report)
- Black-owned businesses support 3.56 million jobs in the U.S. (2022 Brookings Institute report)
- Fayetteville, N.C., has the highest percentage of Black-owned businesses in the U.S. (LendingTree study)
Why supporting Black-owned businesses is important
Although Jim Crow laws were deemed unconstitutional in 1954 and the civil rights movement of the 1960s forced the end of segregation, unfair banking practices persisted. It wasn’t until 1977, when the federal Community Reinvestment Act was passed to fight racial discrimination in lending, that these practices became illegal.
Challenges remain. Statistically, securing capital and investors is more difficult for Black-owned businesses. Crunchbase reported that Black startups received just 1.2 percent of the $147 billion in venture capital invested in U.S. startups in the first half of 2021.
According to a 2020 Bureau of Economic Research paper, the average level of startup capital for Black entrepreneurs is just $35,205, compared to $106,720 for white entrepreneurs. Only 1 percent of Black businesses obtain business loans in their first year, as opposed to 7 percent of white-owned firms.
A study commissioned by Groupon and the National Black Chamber of Commerce found that 59 percent of Black business owners reported being victims of racism or bias when starting their business.
The disparity continued during the Covid-19 pandemic. The New York Times reported that Black business owners had a harder time finding lenders who would work with them for the Paycheck Protection Program than white business owners.
And then there’s the racial wealth gap. A 2021 Duke research paper found the typical Black household holds about 12 cents for every dollar of wealth that the typical white family holds.
For these reasons, you may be motivated to take action and support Black-owed businesses. Not only will you be a force for economic good, but it can be a way to celebrate and continue Black culture. Bolstering sales can help prove to lenders that the company has intrinsic worth. And by becoming a regular shopper, you increase the company’s visibility and representation.
6 ways you can support Black-owned businesses
There are a number of easy ways you can do your part to support Black-owned businesses:
Be intentional about shopping at Black-owned businesses
You may not know where to find small Black-owned businesses. Apps such as Nextdoor and community boards like Craigslist can be an easy way to learn. Create a post where you ask who in your neighborhood or city could use some extra business, and wait for the replies to pour in. It’s also a great way to spark a conversation about the value of helping each other out.
Another option is to use a sourcebook as a way to spend at Black-owned or operated businesses. The Official Black Wall Street directory is a comprehensive directory with which you can search for a vast array of products and services, both e-commerce and brick-and-mortar. Start making a list of all the places you would like to shop from, and for which products and services you’d like to purchase.
You may also want to budget specifically for shopping at Black-owned businesses, by deciding in advance how much you can spend as per your budget, and selecting at least one Black-owned business to visit a week or month. While August is Black-Owned Business Month and a great reminder to be intentional while shopping, a concerted effort to fill in the gaps throughout the year can keep someone in business during lean times.
Write and share reviews of Black-owned businesses
If you have had positive experiences with Black-owned businesses, be sure to share them on platforms that are commonly used by the public. According to data collected by ReviewTrackers.com, in 2021 88 percent of all reviews come from the top review sites: Google, Yelp, Facebook, and Tripadvisor. There are others, too, of course. For example, you may find creatives on sites like Etsy. After purchasing and loving what you got, write a glowing review. Every compliment helps.
When you post on any of the most used review sites, you can help the business be found online through search engine optimization analytics, and your praise can inspire other people to spend their money at these establishments.
Recommend Black-owned businesses in person and on social media
In addition to formal reviewing sites, social media platforms like Twitter, Facebook, and TikTok are perfect vehicles to spread the news about the Black-owned shops in your neighborhood that you really like.
Create content where you explain why you think this business is worthy of attention, add some photos or video, and include the business’s website. If there is a physical address, post it too. The key is to make the message simple for other potential customers to find and patronize. Be sure to tag the business so they can get a heads up. Billions of people use social media platforms every day, so the reach is tremendous.
Not online? No problem. Keep the conversation going by mentioning the business to your friends and family members. If the business you want to help support a bar, café, restaurant, art gallery or clothes store, think outside the box. In addition to being a customer, you may want to ask about ways you can support them by renting out the space on off hours or slow days. Attendees may even be able to purchase items during the party, event, or meeting
Support Black-owned banks
Consider seeking out a Black-owned bank or credit union for your deposit accounts, credit cards, and loans. It’s an official designation: the Federal Deposit Insurance Corp, or FDIC, classifies these financial institutions as Minority Depository Institutions (MDIs). To meet the criteria, minority ownership needs to be at least 51 percent or the majority of board members is composed of minority members. The financial institution also is required to serve a predominantly minority community base.
People of all races can use MDIs. By doing so, you help these businesses survive so they can provide valuable services to the community. If no MDI with a physical location is close to you, check out their digital banking services. As a customer, you can show your solidarity with people who have had discriminatory experiences, both historically and currently, with lenders.
Invest in the Black community
If your goal is to be a part of fostering company growth and equality, investing in the Black community is a way to meet it. Effective ways to invest include:
- Investing in Black-owned startups, found on micro-investing platforms such as Kiva
- Buying shares of Black-owned companies that are traded on the stock market
- Working with a Black investment professional, such as a CFP or CFA, to reach your investment goals
- Concentrating your investment decisions on minority empowerment ETFs, which are developed to give exposure to U.S. firms that have demonstrated racial and ethnic diversity policies
However you decide to invest your money, recognize that the choice can be a part of helping to break the cycle of debt many Black-owed businesses face. A 2019 Congressional Black Caucus Foundation report found roughly 17.6 percent of Black business owners turn to personal credit to fund their new businesses, compared to 10.3 percent of White non-immigrant startup owners.
Because credit cards tend to have higher interest rates than bank loans, the entrepreneurs are at a disadvantage from the start. By supporting them as an investor, you can strengthen their overall financial position.
Build relationships with Black-owned businesses
Yet another way to demonstrate support is by ensuring exposure. Small business owners can be so busy managing their venture that they don’t have time to promote themselves. Assist the business owner by taking steps to form and build valuable relationships.
- Invite them to join community groups in your area where they can showcase their goods and services.
- If you have connections to the media or know someone who has a podcast or writes a widely published newsletter or blog, ask for the owner to be featured.
- Ask the owner to join relevant business networking organizations and events.
- If you have them offer workspace and facilities, either for free or at a discount.
- Share your business contacts and make direct referrals.
If you discover a Black-owned business is struggling to stay afloat, consider offering mentorship and providing resources. There are many, including the Black Business Association, Black Founders and Coalition to Back Black Businesses (a conjoined effort between American Express, the U.S. Chamber of Commerce Foundation, the National Black Chamber of Commerce, National Business League, U.S. Black Chambers and Walker’s Legacy).
The bottom line
The challenges that many Black business owners have faced, and continue to grapple with, are real. The good news is that you can do a tremendous amount to become a positive force. This requires understanding the background, having a conversation about what’s needed, listening to the response and then taking action to even out the playing field. With National Black Business Month upon us, you have an opportunity to start making the changes you want to see in society.
