The pandemic was particularly rough on Black-owned businesses, many of which are concentrated in retail, restaurants, and other sectors where social distancing is hard.
In addition:
- 58% of Black businesses were at risk of financial distress before the pandemic, compared to 27% of white-owned businesses.
- Between February and April 2020, the number of Black business owners in the US dropped 41% compared to 17% for white business owners, per Reuters.
- In the 1st round of Paycheck Protection Program (PPP) funding, Black-owned businesses were 5x more likely than white-owned businesses to receive nothing.
But now, Black-owned businesses are on the rise
An analysis of Census data by Robert Fairlie, a research associate at the University of California, Santa Cruz, found that the number of Black business owners was 28% higher in Q3 2021 than pre-pandemic, per US News. Why?
Black-owned businesses were already growing pre-pandemic, increasing 8% between 2018 and 2019.
And while the pandemic stalled many companies, it also led to new business growth overall as people pivoted into new revenue streams.
Additionally…
… the racial reckonings of 2020 led to greater scrutiny of disparities facing Black business owners, including:
- Net worth: As of 2019, white families had a median net worth 7.8x that of Black families, meaning they’re less able to rely on family financial support.
- Access to capital: Only 3% of venture capital goes to Black founders.
As a result, many consumers rallied to support Black businesses, initiatives were launched to help Black entrepreneurs, and later PPP rounds were more equitable for minority-owned ventures.
“My guess is that the revised PPP program helped… but also more racial inequality awareness by customers and larger businesses seeking suppliers,” Fairlie told US News.
To keep this momentum…
… may be challenging. A McKinsey report noted that only 4% of Black startups are successful, and most start with ~$72k less capital than white startups.
But investments in an equitable business ecosystem that closes the wealth gap could add $1T–$1.5T in annual GDP.
For more: Check out this Brookings report to see interactive charts that show how racial parity would change major US metro areas.
