Black Businesses Face Steep Funding Decline: New Report Highlights Persistent Barriers
A report from The Alliance for Entrepreneurial Equity has found a troubling decline in venture capital and other forms of funding for Black-owned businesses.
While the number of Black-owned businesses are growing, they are severely underrepresented compared to their population making up only 2.5% of all businesses.
In recent years, Black-owned businesses have faced challenges in securing funding, a trend that blocks their growth and reflects issues within the American financial landscape.
The Alliance for Entrepreneurial Equity’s latest report, a collaboration between the National Urban League and Third Way, illuminates the persistent hurdles that prevent these enterprises from realizing their potential.
A Persistent Funding Gap
The report reveals a decline in venture capital and other forms of funding for Black-owned businesses following a brief surge after the 2020 George Floyd uprisings.
This downturn is part of a broader pattern of underfunding that disproportionately affects Black entrepreneurs.
For instance, while 40% of Black business owners are outright denied loans, lines of credit, or cash advances, only 18% of their white counterparts face the same rejection.
This funding disparity is not just a barrier to growth; it’s a stark illustration of the systemic inequalities that Black businesses navigate daily.
“The promises of racial justice that America made in the wake of George Floyd’s murder cannot be abandoned,” said Marc Morial, the president and CEO of the National Urban League.
“The efforts to distort the nation’s history of racial oppression and discrimination, the silencing of Black voices in classrooms, the dismantling of affirmative action and diversity, equity and inclusion policies are part of a coordinated campaign to preserve systemic inequality.”
High-Risk Labels and Limited Access
Black-owned businesses are often categorized as high-risk investments, which further complicates their ability to secure traditional financing.
They are frequently shut out of government contracts and must resort to non-traditional means to find capital.
This situation is heightened by the businesses’ tendency to be younger, smaller, and concentrated in certain industries and urban areas east of the Mississippi River.
Call to Action: Strategies for Change
The Alliance for Entrepreneurial Equity proposes several strategies to counteract these barriers.
Their report calls for informed policymaking and targeted interventions to reverse these systemic barriers and foster a more equitable entrepreneurial ecosystem.
It’s a call for a return to the spirit of the legislative advances made post-Civil War, which sought to empower Black Americans economically.
