June 28th 2023.
For years, Black businesses have faced an uphill battle to secure capital to scale up their operations. Financing has been a major obstacle, leading to lower revenue and profits and ultimately, more business shutdowns.
However, there is now a glimmer of hope for these entrepreneurs. A new study conducted by Creative Investment Research has revealed that the U.S. Small Business Administration (SBA) is expected to lend Black firms $1 billion in 2021, a significant jump from the $599 million they lent in 2017.
The study found that 7.76% of SBA loans were issued to Black business owners from October 2022 to mid-June 2023, compared to 3.86% in 2017. It also reported that the percentage of loan dollars to Black entrepreneurs rose to 4.41% from 2.36%.
William Michael Cunningham, an economist and the owner of Creative Investment Research, believes that this report is indicative of the progress that Black entrepreneurs are making in a challenging economic environment. He conducted the analysis in honor of Juneteenth and said that “access to capital is the key that unlocks the door to economic empowerment and unleashes the true potential of entrepreneurs.”
An SBA spokesperson echoed this sentiment, stating that improving equity within their lending programs and strengthening outreach to underserved communities is a top priority for the Biden-Harris administration.
Cunningham also noted some areas for improvement, including the fact that SBA loan allocations for White-owned businesses were 11 times higher than for Black businesses. This indicates the racial disparity gap that Black entrepreneurs face in pursuit of business growth.
Cunningham believes that the significant drop in “unanswered” responses regarding ethnicity after the murder of George Floyd and the subsequent focus on racial justice is a promising sign for the future. However, more work is needed to ensure equitable access to capital and economic opportunities.
Overall, this report highlights the potential of the SBA loan program to help Black businesses get the funding they need to succeed. It is a promising development and a step in the right direction for Black business owners.
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