Minority business owners face the same challenges as other entrepreneurs – developing a sound business plan, understanding the market and competition, and creating products and services that customers need.
However, for many minority business owners, there are additional complexities, challenges … and opportunities ahead in 2019.
When exploring challenges and opportunities for minority business owners in 2019, several issues are evident. Minority entrepreneurs face racism, difficulty in securing funding, and a lack of social capital on which to draw.However, there is hope in the form of resources at the federal and local level to give minority business owners a competitive advantage.
The Discrimination Dilemma
Whether overt or subtle, racism and discrimination are very real for minority business owners. In fact, a 2016 report by the Washington, D.C.-based nonprofit Center for Global Policy Solutions, quantifies the issue in stark terms.
According to the report, based on 2007 and 2012 U.S. Census data, the racial gap in business ownership costs the country as much as $300 billion in lost income and as many as nine million jobs.
The Kellogg Foundation issued a report showing the opportunity cost of not closing the racial equity gap in the United States. The report points out that strengthening purchasing power and increased tax revenue would add $8 trillion in gross domestic product.
Given the increasing global competition and economic growth of new economic powers like China, it is even more critical for the United States to leverage the potential of would-be entrepreneurs of all backgrounds.
According to the report, by 2050, the majority of the working-age population will be non-white. Twenty-nine percent of that cohort will be Hispanic or Latino (up from 18 percent today). Black and African American workers will comprise 14 percent, up from 13 percent today and Asian Americans and Pacific Islanders will make up 10 percent, up from just 6 percent today.
Kellogg spotlights the harm that institutional racism causes from a business perspective. It estimates that there would be nine million more potential jobs if ownership rates among people of color were equal to those of whites.
While data point to many factors contributing to lower access to capital among people of color (see below), the Kellogg report raises several other important issues:
“This suggests that programs to increase access to capital for underserved populations and support business training and mentorship could leverage the initiative that already exists,” the report states, “and drive a significant increase in the number of successful small businesses, while reducing racial and ethnic earnings and wealth gaps.”
Discrimination in Financing
One of the areas of discrepancy that is most significant for minority entrepreneurs is the gap in business financing.
According to one study, minority-owned businesses grew by 79 percent from 2007 to 2017. That represents a staggering 10-fold increase compared to overall small-business growth for the same period.
However, the strength in numbers does not translate to financing. Data from the U.S. Commerce Department’s Minority Business Development Agency shows that minority-owned businesses face significant financing gaps:
The main reasons why lending disparities exist are usually given among the following:
The Lack of Social Capital
Lack of access to monetary capital is just one barrier facing minority business owners. The other is a lack of social capital.
Having powerful networks of advisors, peers, colleagues, and other business owners is essential for entrepreneurs wanting to market, seek advice, and lean on others.
The U.S. Black Chambers, Asian American Chamber of Commerce and U.S. Hispanic Chamber of Commerce offer local chapters, networking events, educational programming, and other resources designed to foster deeper connections among business owners. However, such institutions have different missions than other civic and business organizations that are critical for expanding social capital.
Opportunities for Business Owners
While minority business owners face very real challenges that non-minority owners do not, there are resources and opportunities available. Here are a few resources that are designed for minority-owned businesses.
How Entrepreneurs Can Take Action in 2019
Whether you have just started a business or are thinking about doing so, there are many things you can do in 2019 to boost your chances of business success. Here are a few tips.
One opportunity is to partner with Benetrends. For decades, Benetrends has helped thousands of business owners access capital without the need for loan applications, high-interest rates, or challenging pay-back schedules.
With Benetrends’ Rollover as Business Start-Ups (ROBs) plan, your business uses existing 401(k) or other retirement accounts to finance start-up or expansion costs, with no tax penalties or early-withdrawal losses.
In a matter of weeks, you can have access to much-needed funds for whatever your business needs most. To learn more about ROBs 401(k) business funding from the leader in innovative small-business financing, schedule a consultation with Benetrends today.
Our mission is to make every Benetrends client our champion. For over 35 years, our Rainmaker Plan® has been tested and proven to work, providing a means for more than 17,000 entrepreneurs to achieve their dreams of business ownership, creating both jobs and prosperity. We are so confident in the Rainmaker Plan design that we stand fully behind our work, backing every client with our Rainmaker Guarantee.
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