There is no denying that the COVID-19 pandemic affected small business operations. There was business growth and adaptation, but closures still occurred. The start-up business landscape led by women and minority-owned businesses, however, has made a resurgence after a short downfall.

In 2020, there were an estimated 140,918 United States firms with a majority Black or African-American ownership, up 14 percent from 124,004 in 2017. These firms brought in an estimated $141.1 billion in gross revenue in 2020, an 11 percent increase since 2017 (Census Bureau’s Annual Business Survey). Currently, 52 percent of all Black-owned businesses are owned by women or have women partners.

Business Growth

This impressive growth led by minority females occurred for a variety of reasons including the following:

• More minority women are graduating from college. Education gives them greater confidence and skills to run a business.
• Minority women grew tired of jobs with few opportunities for advancement. They are sometimes asked to train their boss.
• Minority women are more likely to experience long-term unemployment and lower wages.
• The growth of technology and social media enables minority women to network and reach their customer base online.
• They can create their own source of income and employment for others.

Funding Inequities

While minority female-led businesses are growing, they still have problems getting start-up and expansion funds. Lack of funding and unfair lending practices are common realities in minority communities. For example, mortgage discrimination–including higher online lending fees, higher loan interests, and higher home costs–is common in urban communities. Unfortunately, these discriminatory practices spill over into business as well. There was some capital pouring in as part of the COVID-19 relief packages, but those funds are no longer available.

According to a study by the Small Business Administration (SBA), women and minorities are deemed more of a risk for business lending. Minority women may have little access to credit, not only for start-up funding but also for business expansion, even after successfully generating revenue in their businesses. The Federal Reserve System’s 2020 Small Business Credit Survey further indicated that Black women are more likely to identify access to credit as a challenge than other minority peers are. In addition, the survey reported they are less likely to receive some or all of the financing they requested. Furthermore, the SBA Office of Advocacy found that women and minority business owners are denied loans and pay higher interest rates than White males do, even when they have the same credit score.

Efforts to Improve Funding

Capital is vital for small businesses to start and grow. That’s why expanding access to capital and making sure there are ample pathways to reach that capital is a core pillar of the efforts from the federal government to support small businesses. There are increasing efforts to correct these funding inequities through various financial sources. A surge in female-focused funds is an encouraging sign. For example, New Voices Fund, Backstage Capital, and Cleo Capital are all capital funding resources available to qualified minority female entrepreneurs.

The plight of minority women in business is an exceptional journey and story of persistence. As many say, they are the epitome of being self-made. With so many resources now available, people expect to see continued growth among female minority-owned businesses. For example, in Birmingham, the Alabama Cooperative Extension System at Alabama A&M partnered with The Salvation Army, a local nonprofit ELI Thrive, and Operation Hope to create a minority business incubator with a focus on helping Black women start their entrepreneurial journey. Participants first enter the program Credit & Money Management with Operation Hope. Then they go through six weeks of business classes provided by Alabama Extension, focusing on the business model canvas tool, formalizing the business, bookkeeping, and marketing strategy.

Since the spring of 2022, 35 women (Black women-owned businesses) have completed the program. Each graduate receives a $1,000 grant to help with the launch of their business along with professional coaching, networking opportunities, and continued support.

More Information

As the country continues to move on from the pandemic, there are still opportunities to take a chance, learn something new, and venture into starting a small business and fulfilling a longtime dream. Minority business owners looking for support can contact Terence Norwood, an Alabama Extension community and economic development specialist at Alabama A&M University.