According to Harvard Business Review, Black women are the fastest-growing group of entrepreneurs in the United States. Still, when securing funding crucial to their business' success, Black women business owners receive less than one percent of total financing (.34 percent, to be exact). Despite Black-owned companies generating employment opportunities; providing new and inventive technologies, products, and services; and revitalizing communities, they often struggle due to this lack of capital.
To put this funding gap into perspective: Black-owned businesses only receive funding 18 percent of the time, and their capital averages $35,205, according to a report from Fundera, a financial resource for small businesses. Meanwhile, 59 percent of white-owned business owners receive assistance, and their startup capital averages $106,720, according to that same report. What's more, according to the "State of Minority Business, March 2022" report by Creative Investment Research, 40 percent of Black Business owners didn't even apply for financing because they were discouraged from doing so.
Clearly, changes need to be made at every level for funding to become truly equitable. Here's what needs to change.
1. Continue dismantling systemic disenfranchisement
Systemic and historical disenfranchisement has long presented obstacles for Black women and women of color. These hurdles still create income inequality for Black entrepreneurs, which can, in turn, limit their financial freedom if they decide to start a business. A United States Department of Labor report states that Black women earn 63 cents for every dollar earned by white men, and where the educational level is the same, Black women earn just 65 cents to the dollar.
2. More transparency about the road to funding
For BIPOC entrepreneurs, finding funds outside of self-funding their own business is categorically challenging. Finding the right source of funds can feel daunting, so Bank of America has partnered with Seneca Women, a global platform committed to making the world more equitable for women and girls.
Together they've created Capital Directory for Black Entrepreneurs and Capital Directory for Women Entrepreneurs, vast databases and directories that make it easier to find hundreds of organizations that provide funding for Black-owned and women-owned businesses in the United States. The featured sources of capital can even be segmented to isolate aspects of the directory, such as available funding from:
Community Development Financial Institutions (CDFIs): Nonprofit loan funds or grants that can also provide advice and mentorship
Venture Capital and Angel Investors: Primarily firms and individuals seeking to invest in startups
Award-based funding: Grants typically from the government, corporations, foundations, or individuals, where repayment is usually a non-factor
Loan Funds: Lines of credit and secured and unsecured loans from nonprofit organizations, investment funds, and nonbank corporations and institutions
Crowdfunds: Funding that's usually made available, amplified, and advertised through social media and crowdfunding sites where individuals in large numbers financially back a new business.
In addition, the Tory Burch and Bank of America Capital Program is yet another initiative to give women small business owners more affordable options. They are helping these entrepreneurs in areas of access to networking opportunities and beyond.
3. More resources and mentors need to be made available for Black-owned brands
Part of the path to equity for Black women-run businesses is making clear access to resources and mentors, who can help you to shape the future of your business. Bank of America has compiled credit and funding resources that provide valuable information for new entrepreneurs, long-term business owners, and those contemplating starting their businesses. Whether deciding between a line of credit, a business credit card, or questions about small business administration loans, you can navigate through this repository to find answers to many of the questions that may be challenging you today.
For those entrepreneurs looking to connect with a mentor or have your problem solved, there are ample opportunities to connect with likeminded individuals at Create & Cultivate in-person events. Sign up to attend our next events Wellness Means Business (October 1, Los Angeles CA) and Small Business Summit (October 16, New York, NY).
