Access to capital: that’s the single most important challenge for Black business owners, according to new research from the Goldman Sachs 10,000 Small Businesses initiative. The data has laid bare what Goldman Sachs Foundation President Asahi Pompey calls “the pandemic within the pandemic:” the racial disparities in the U.S, and their ripple effect.
Twenty-seven percent of Black business owners applying for capital were rejected — that’s three times the rate of white applicants. Two-thirds of Black business owners said capital was an important resource in growing their business, compared with just over one-third of white entrepreneurs. The numbers are drawn from numerous surveys of the 10,000 Small Businesses participants over a decade-long period.
“Black business owners tend to be over-mentored and under-capitalized,” said Pompey in an interview at the Yahoo Finance All Markets Summit on Monday. “We have a fabulous Black woman entrepreneur in Detroit, Carla Walker-Miller, and she likes to say the worst time to meet a banker is when you need money. What she means is if you don’t have that established relationship with a banker in an organization, it becomes very difficult for a Black business owner to get funding.”
Indeed, even after the U.S. government approved billions in pandemic aid for small businesses, many banks prioritized the loan applications of existing wealthy clients, The New York Times reported in April, citing bank employees and financial industry executives. A study released in July also found Black applicants had a harder time getting loans through the government’s Paycheck Protection Program than white ones.
Graphic credit: David Foster
‘They have a bigger voice now’
For its part, the Goldman Sachs 10,000 Small Businesses program has helped 9,700 entrepreneurs with access to capital as well as education and business support services. Funding has flowed in part by seeding Community Development Financial Institutions, which Pompey said are an important resource.
The organization also advocates for policy changes to help small businesses, and helps entrepreneurs connect with lawmakers — and Pompey said they’re listening.
“I do think they have a bigger voice now,” she said. “I think people are more willing to listen to what their concerns are. What we've seen is that it was hard being a small business pre-pandemic, and being a small business in a pandemic is even tougher.”
The below graphic shows that, compared to white entrepreneurs, Black entrepreneurs have a greater need for stronger ties to capital resources; a greater need for the ability to access and hire a strong team; and a need for more mentors and an advisory board.
Graphic credit: David Foster
Pompey said she’s optimistic about the path forward for small businesses, as well as for racial equity — she said that as a Black woman and mother of two young sons (as well as a 15-year employee at Goldman), she’s encouraged by the discourse sparked by the resurgent Black Lives Matter movement this summer.
“We’ve got to translate this moment into a movement,” she said. “In order to make sure that we really seize upon this generational opportunity, we have to use it to create policies, procedures, greater access to capital, greater access to network, greater advocacy, greater education that has multi-generational impact.”
The impact is clear from another finding from Goldman’s surveys: 52% of Black business owners acted as community leaders (compared to 40% for their white counterparts), and nearly three-quarters of them mentored community members.
Julie Hyman is an anchor on Yahoo Finance Live.