Business revenue: Race and gender should not hinder business success and growth.

Insights & Analyses

  • Racial inequities in business revenue tend to be more severe among firms with paid employees than among sole proprietorship.
  • Among firms with paid employees in 2018, average annual revenues for white-owned firms are about 2 times higher than for Asian-, Latinx-, and Black-owned firms.
  • Average annual revenues among Black- and Asian-owned firms with paid employees in 2017 were highest in the manufacturing and wholesale trade industries; they were highest in wholesale trade and management for Latinx-owned firms, utilities and management for Native American-owned firms, and utilities and wholesale trade industries for white-owned firms.
  • Women-owned firms with paid employees had average revenues of about $1.5 million in 2017 compared with $3.2 million for men-owned firms. Among sole proprietorships, those owned by women had average revenues of $27,600 while those owned by men had average revenues of $57,400.

Drivers of Inequity

People of color are less likely than white people 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 more than twice as high compared to white-owned businesses Business owners of color also pay higher interest rates and receive lower loan and equity investments. During the shelter-in-place phase of the Covid-19 pandemic, racial discrimination among lenders prevented many entrepreneurs of color from accessing paycheck protection program loans. Underrepresented groups also often face barriers to accessing important networks and training programs for maintaining a successful business.


Grow an equitable economy: Policies to help small businesses grow and thrive

Strategy in Action

Equity-focused capital investments help small businesses in California thrive. Pacific Community Ventures, a Bay Area-based community development financial institution (CDFI), offers a targeted approach to small business development that seeks to remedy the historical gaps in access to capital amongst entrepreneurs of color. As PCV notes, people of color account for an outsized share of new small business owners, but many struggle to secure funding for ventures that could fill valuable economic niches and offer needed services to historically under-resourced communities, like affordable childcare centers for working families. Based on principles of restorative capital, PCV invests in businesses that can fill these economic niches and help invigorate low-income communities from within. Besides issuing small business loans, PCV also works with entrepreneurs to help balance their financial planning and profit-making with the well-being and security of their employees. In 2021, 90 percent of PCV’s nearly 1,700 clients were entrepreneurs of color and/or women, and 86 percent of their investment dollars went to low-income communities. Learn more.

Photo: Toa Heftiba on Unsplash

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