A hefty 56% of Back business owners report obstacles obtaining credit restrict their ability to grow.
Bank of America’s 2021 Black Business Owner Spotlight provides more affirmation why gaining financing lingers as a big hurdle for Black entrepreneurs aiming to start or expand a business. And 82% of entrepreneurs of color say they must work harder to gain the same success compared to their non-diverse peers.
The report was part of an extensive survey of nearly 1,050 small-business owners with annual revenue of $100,000 to $5 million in late July and early September. Some 307 Black business owners—about 30% of all respondents—were interviewed. Bank of America, the nation’s second-largest bank, did the study to explore the goals, challenges, and everyday realities of Black business owners nationwide.
The study revealed amid the COVID-19 pandemic, the top economic concerns Black entrepreneurs are thinking about include the impact of COVID (78%), political environment (71%), and health care costs and consumer spending (both 67%).
A.J. Barkley, neighborhood lending executive for Bank of America, told Black Enterprise by email that access to capital is critical for the success of any business owner. “The fact that more than half of Black business owners today say challenges accessing capital have limited their business’ growth is deeply troubling.”
She added that the bank’s efforts include working to provide guidance through the Paycheck Protection Program (PPP) process and discussing traditional loan products to fit individual needs like purchasing inventory, refinancing debt, or financing account receivables.
Bank of America says it is the nation’s largest investor in community development financial institutions (CDFIs), with over $1.6 billion in loans and investments to more than 250 CDFIs. In practice, the bank has reported it will include philanthropy, sustainable finance through lending and investing, CDFI and MDI partnerships, development of financing solutions for small businesses.
On the endurance front, Black businesses are staying resilient despite emerging challenges from COVID. The study revealed some 48% of Black entrepreneurs have retooled their operations to cope with that devastating impact, that figure was a whopping double that of the national average.
Barkley says Black owners have made operational adjustments to adapt to COVID. Those moves include shifting to a digital presence, applying enhanced sanitation practices, as well as changing their main revenue stream and hours. “I encourage Black entrepreneurs to continue to find creative ways to reinvent and repurpose their businesses while supporting and serving their local communities.”
But that could be an ongoing task. The American Banker reported a survey of community bankers showed 43% do not expect the economy to entirely rebound from COVID until 2022, while a quarter said it could take even more time.
At the same time, the Bank of America report had uplifting news from Black proprietors. Some 43% are confident that the national economy will improve during the next 12 months, and 44% expect that locally. Additionally, 48% project revenue to increase and 22% plan to hire during that period.
By 2030, Black business owners (71%) expect to see more people of color in executive or C-suite roles, more of those folks in STEM fields (68%), and a big rise in businesses owned by people of color (67%).