To unlock the potential of black-owned small and medium-sized enterprises (SMEs), they need to be provided with the necessary support to build capacity and share knowledge. This can be achieved through the help of black service providers, who are compensated by organizations that are dedicated to promoting equity in entrepreneurship. This will not only protect and strengthen black-owned businesses, but also create business networks with black-owned SMEs at their core. Boosting black business growth is a much more complex task than simply providing capital.
It requires leaders from financial institutions, philanthropy, government, corporations and investors to come together and collaborate towards a set of objectives that address systemic barriers. From supportive policies to representative leadership, it is essential that we work together to create an economy that reflects the promise of America. The history of structural racism has created a unique opportunity for African-Americans to set up their own businesses. The more isolated black communities were from white communities, and the more white entrepreneurs refused to serve black customers, the more likely it was for entrepreneurial black entrepreneurs to create their own viable businesses.
However, the challenges faced by black entrepreneurs in the United States are vast and deeply rooted in historical injustices. They are still denied or given lower bank loans at more than twice the rate of their white peers; only 1 percent of black companies borrow in their founding year and paying higher interest rates. About 20 percent of African-Americans run early-stage businesses, but only 4 percent last more than three and a half years. Eight out of 10 black-owned businesses fail within first 18 months - CNBC. Babson also found that blacks had a much lower rate of established business than whites, 5%, compared to 9%.
This suggests that while African-Americans may be more entrepreneurial than other ethnicities, their businesses may not stay that long. In one study, 73 percent of black loan applicants were asked to provide financial statements of their businesses, compared to 50 percent of white applicants with comparable profiles. In order to create a supportive ecosystem for black-owned businesses, both the private and social sectors should help them build capacity and facilitate knowledge sharing. The contributions of black leaders can help create positive experiences and build trust in institutions and ecosystems that have felt exclusionary. Metropolitan areas with the highest salaries for black companies are different from technology centers that pay the highest salaries for non-black companies. What's more, 68 percent of black women entrepreneurs with paid employees belong to three industries that account for only 13 percent of total business income. Organizations should also devote funds to supplier development programs that can help black-owned suppliers better participate in supply chains.
This will enable them to benefit from economies of scale and access new markets. The analysis found that 50% of black entrepreneurs are women, a higher rate than other groups; 40% of white entrepreneurs are women and 39% of Latino entrepreneurs are women. To overcome market barriers, it is essential that we work together to create an equitable environment for black entrepreneurs. This will require leaders from various sectors to align and collaborate towards a clear set of objectives that address systemic barriers. From supportive policies to representative leadership, it is critical that we build an economy that reflects the promise of America.
