Black women are now one of the fastest growing demographic of entrepreneurs in the U.S., with over 2.7 million businesses nationwide. Black women presence may be growing in the business world, but they also face disproportionate financial support.
Black women owned businesses grew 50% from 2014 to 2019, representing the highest growth rate of any female demographic. Black females accounted for 42% of all women who opened a new business during that time and represented 36% of all Black employers. Black-owned businesses are significantly more likely to be woman-owned than the national average. 35.4% of Black-owned businesses are woman-owned, compared with 20.9% overall woman-owned businesses.
In the U.S., 17% of Black women are in the process of starting a new business, compared to 10% of White women and 15% of White men. Motives for creating a new business include producing a source of income or following a dream.
Going further, a 2021 analysis from the Brookings Institution estimates that roughly 96% of Black-owned businesses are sole proprietorships — unincorporated businesses with a single owner. It can be hard for sole proprietors to raise capital, and that’s especially true for Black business owners.
Some may suggest that more black women are starting their own businesses because of the unequal treatment and lack of opportunities in the workforce. We know that the millennials would rather start their own businesses, rather than take any mistreatment in the workplace.
Running a business does not come without its challenges – and those headwinds are disproportionately distributed among Black women. In fact, there are fewer established businesses run by Black women relative to their high rate of entrepreneurship, with just 3% of Black women running mature businesses. (Maturation is widely recognized as a business surviving past five years.)
Moreover, Black female founders earn an average revenue of just $24,000, compared to $142,900 among all women-owned businesses.
Why the inequities? One explanation might be the types of businesses started, with 61% of Black female entrepreneurs starting businesses in the retail/wholesale, health, education, government or social services sectors. This compares to just 47% of White women and 32% of White men entrepreneurs starting businesses in those sectors. Because these sectors are crowded with low margins and high competition, these types of businesses are more difficult to sustain over time.
Another possible explanation is the lack of access to capital, with 61% of Black women self-funding their startup capital. This comes even though just 29% of them live in households with incomes over $75,000, compared to 52% of White men.
The trend to self-fund is likely because Black women find it difficult to get funding elsewhere. Black business owners who apply for funding have a rejection rate that is three times higher than that of White business owners, and they are more likely to identify access to credit as a challenge. Meanwhile, only 2% of venture capital funding goes to U.S. female-only founder teams.
“Black women are positioned to play an increasingly visible and important role in the United States’ future like never before,” Ernest said. “To elevate their voice and their careers, and to achieve the American Dream of social and economic equality, we believe that entrepreneurship is key and that we must play our part in targeted efforts that enable Black women entrepreneurs to grow and sustain their businesses.”
JPMorgan Chase has already begun that process, committing $30 billion over the next five years to advance racial equity and provide economic opportunity to underserved communities, with a focus on Black and Hispanic communities. Specifically, some of the capital will be used to increased lending and technical assistance for these communities. JPMorgan Chase also has a program targeting female-owned businesses for advice, mentorship and networking.
“These conscious efforts will require the government and private sector to uncover and address gaps and biases in entrepreneurial ecosystems in a way that provides inclusivity and support for the diversity of entrepreneurs, and that brings economic and social value to American society,” Ernest said.
Are you a black woman that has received any funding from JP Morgan bank? They are claiming that they are trying to fix the issue and I would like to know if it’s really true!