The so-called American dream is only for the few. Making your own way and pulling yourself up by your bootstraps is difficult considering only 31% of Black-owned businesses receive the funding they’ve applied for. The Coronavirus has only exasperated issues for Black business owners. 40 percent of Black-owned businesses have closed since lockdown, while many have systematically been shut out from receiving federal assistance during the pandemic.
Closes the Racial Wealth Gap
We can trace the origins of today’s racial wealth gap to Jim Crow-era practices like redlining and job discrimination which segregated African Americans from higher paying jobs and homeowner ownership opportunities that ultimately prevented wealth building. The 1935 Social Security Act did not afford coverage to domestic and agricultural workers, many of whom were African American also excluded the large number of African Americans working menial, “off the books” jobs and migrating North at the time.
Today, the median wealth for white families is about 12 times that for Black families averaging around $140,000, and one in four black households have zero or negative net worth compared to less than one in ten white families without wealth. Even more concerning is that by 2053, the median wealth for Black families is projected to fall to zero.
Small businesses and entrepreneurs have been longtime wealth builders in our society. By supporting more Black-owned businesses, Americans can create more opportunities for meaningful savings, property ownership, credit building and generational wealth.
Strengthens Local Economies
When small businesses flourish, so do their communities. But banks often hinder that prosperity by discriminating against African American and other entrepreneurs of color seeking small business loans. A 2017 study by the National Community Reinvestment Coalition actually found that banks were twice as likely to provide business loans to white applicants than Black ones and three times as likely to have follow-up meetings with white applicants than more qualified Black ones.
If consumer spending accounts for 70 percent of the entire US economy, imagine what directing some of that spending power to Black-owned businesses across the country can do. 48 percent of small business purchases are recirculated locally compared to only 14 percent of what’s circulated by chain stores. Supporting Black-owned businesses in turn supports families, employees, and other business owners, as well as attracts community investors who provide banking services, loans, and promote financial literacy--all things that build economic strength.
Fosters Job Creation
Many African American business owners fund their own businesses due to the lack of capital mentioned earlier. This means that most Black-owned businesses are sole proprietorships that don’t make enough money to pay employees. 2012 US census data showed that Black-owned businesses created 1 million jobs compared to white-owned businesses which created almost 56 million.
In 2018, the unemployment rate for African Americans fell to 6.6 percent, which was almost double that for white Americans and higher for other minority groups. Since Black-owned small businesses are likely to hire from the local community, supporting them can foster the job opportunities people need to achieve financial stability.
Celebrates Black Culture and Serves Communities
Many Black entrepreneurs start businesses inspired by the richness of African American culture itself--Black-owned clothing stores, hair care and make-up products, and children’s toys are just a few examples. And some Black-owned businesses are created to bring access to services specific to the community’s needs. The Necessities Company, an affordable health and wellness company founded to bring access to over 150 natural Black made/owned products with one click, is a great example.
These kinds of business ventures uplift communities, fostering a sense of pride in the people that live there. When you support Black-owned businesses, you get products that are valuable for the unique character they bring. Plus, you avoid spending money at other companies that may not celebrate Black culture, which brings us to another point:
Holds Other Companies Accountable
By now you’ve probably heard about Gucci’s highly offensive sweater design resembling blackface. While Gucci was under fire for all of the decision making that went into the design’s approval and eventual release, it’s not an isolated incident. Many large companies vocally support minorities and their diverse cultures but practice policies that keep systems of injustice intact. Whether it’s H&M’s unsound marketing, Starbucks’ removing people from its store, or Facebook’s hiring diversity problem, African Americans and other minorities often bear the brunt of corporate discrimination.
When you choose a Black-owned business over problematic companies, you vote with your dollar by divesting from these kind of practices and hold companies accountable. And further down the road, you empower successful minority-owned businesses to implement equitable policies.