Business ownership: Race and gender should not be a barrier to owning a business.
Insights & Analyses
- In 2018, racial inequities in firm ownership are far more severe among firms with paid employees than among sole proprietorship.
- Among firms with paid employees in 2020, the rate of business ownership for white workers is nearly four times higher than for Latinx workers and 7 times higher than for Black workers.
- Among sole proprietorships, the number of Native American and Pacific Islander-owned firms grew the most from 2017-2020.
- Among firms with paid employees overall, and for white and black-owned firms, firm growth was strongest in the utilities industry from 2017-20120. For Asian-owned firms, growth was strongest in the real estate and rental and leasing industry, while for Latino-owned firms growth was strongest in the arts, entertainment, and recreation industry.
- Among firms with paid employees, the number of women-owned firms and men-owned firms per 100 workers increased slightly from 2007 to 2020, but there are still about four firms owned by a man for every one firm owned by a woman.
Drivers of Inequity
People of color are less likely than Whites to have access to capital and contracts to start and grow a business, due in part to historical policies such as redlining that denied home loans and wealth-building opportunities to people of color. Today, business loan denial rates for firms owned by people of color are three times higher than for firms owned by Whites. Business owners of color also pay higher interest rates and receive lower loan and equity investments. Although creditworthiness is a factor in loan denials, this metric does not reflect how reliably individuals pay their rent. Underrepresented groups also often face barriers accessing important networks and training programs.
Grow an equitable economy: Policies to ensure equitable entrepreneurship opportunities
- Increase access to resources to help underrepresented entrepreneurs build and repair credit and attract investment and loan capital to start and grow their businesses.
- Increase resources for Minority Business Development Agency (MBDA) Business Centers, which help entrepreneurs of color gain access to capital, contracts, and markets.
- Connect aspiring entrepreneurs to business mentoring programs through government agencies and organizations such as the Network for Teaching Entrepreneurship.
- Include entrepreneurship as a part of career and technical education and include age-appropriate entrepreneurial skill-building in K–12 education.
- Ensure access to affordable banking products, particularly those that can build credit history and credit scores.
- At the federal level, reform the Community Reinvestment Act to expand access to fair financial products and services for entrepreneurs of color, protect and expand the power of the Consumer Financial Protection Bureau to enforce fair lending laws and investigate complaints, and set aside a share of public contracts for businesses owned by people of color to mirror area demographics.
Strategy in Action
Atlanta invests in business owners of color. Atlanta’s office of economic development, Invest Atlanta, is launching the Accelerate Southside Program, which is designed to assist businesses owned by people of color in Atlanta’s southside. The program includes a business training component aimed at supporting participants in overcoming barriers frequently faced by business owners of color, such as absence of accessible capital and risk of displacement. The second aspect of the program provides entrepreneurs with down-payment assistance for their business location. The current cohort includes 21 businesses that range in annual revenue from $40,000 to $5 million. Learn more.