Historically, minorities have lagged behind other demographics when it comes to entrepreneurship. According to JP Morgan Chase & Co., Black and Latino-owned businesses have fewer cash reserves, lower first-year revenue and lower cash balances than white-owned businesses.
There are many contributing factors to this disparity; the two most noteworthy are a lack of access to information/knowledge and difficulty in securing funding to launch and sustain new businesses.
This is an Opinion
In 2021, President Joe Biden signed into law the Minority Business Development Act, which expanded existing programs and mandated education grants to cultivate the next generation of minority entrepreneurs. Minority businesses are one of the fastest-growing segments in the U.S. economy across all industries. According to the U.S. Census Bureau, roughly 100 million people classified as minority persons are living in the United States. There are more than 4 million minority-owned businesses across the country, which account for more than $591 billion in annual revenue.
According to the 2019 Annual Business Survey, about 18.3% (1 million) of all U.S. businesses were minority-owned in 2018. In the 2021 survey, about 1.15 million, or 19.9%, of employer businesses in 2020 were minority-owned. This can be attributed to many factors, including the uptick of resources and efforts devoted to minority businesses.
In Arkansas, 17.5% of businesses are minority-owned. This value is expected to grow as awareness campaigns and initiatives targeted at minority entrepreneurs continue to expand and receive more funding. These include statewide and local resources such as the Arkansas Business Navigator Program, which is an initiative of the Small Business Administration through the Arkansas Small Business & Technology Development Center, the Minority & Women-Owned Business Enterprise Division of the Arkansas Economic Development Commission, Score, Forge, Communities Unlimited, The Conductor, Winrock International-WBC and EforAll, among others.
These programs provide technical assistance, one-on-one consulting, mentorship, networking, training and access to capital through partnerships with local banks.
With this plethora of resources, the challenge has been informing and involving minority entrepreneurs of their existence. There is a level of apprehension and skepticism from some individuals within minority groups toward free resources and government programs. Collaboration, representation, diversity and inclusion have chiseled away at this skepticism little by little, but there is plenty of work to be done to continue to build trust.
A symptom of this skepticism is that many entrepreneurs go the route of starting a business without registering with the secretary of state. In most cases, they will not seek assistance from any of the resources available to entrepreneurs, which puts them at a competitive disadvantage. For example, a business without a business plan is less likely to succeed than one with a well-constructed plan. This outside-of-the-system approach also deprives these businesses of protections offered by government programs, such as the Paycheck Protection Program, or from receiving tax breaks associated with running a business.
As Arkansans, it is our duty to responsibly promote these services in order to bridge the information and resource gap between minority-owned and white-owned entrepreneurs. This benefits the local economy while promoting a more equitable entrepreneurial ecosystem.