In Arizona and across the country, Black entrepreneurs still lack access to financing and capital to grow their businesses, a new study from the Alliance for Entrepreneurial Equity shows.
According to the study, about 40% of black-owned businesses were denied loans, lines of credit or cash advances when seeking financing, compared to just 18% of white-owned businesses. This has meant that Black entrepreneurs have turned to less traditional forms of financing, such as financial technology and online lending companies, as well as community development financial institutions.
In Arizona, organizations aim to increase access to capital for Black- and minority-owned businesses through microloans or investments in private equity and venture capital, according to the 2023 State of Black Business Report produced by Greater Phoenix Economic Council, by the Black Chamber. of Arizona, JP Morgan Chase and SRP.
Arizona has about 1,200 Black-owned businesses that employ multiple people, but most Black-owned businesses in Arizona are sole proprietors, meaning the business owner is the only employee, Imani Augustus, Director of Alliance for Entrepreneurial Equity, said, citing data from the U.S. Small Business Administration. Arizona has about 30,000 sole proprietorships run by Black business owners.
“This is a political opportunity to ensure greater investment for people to expand their businesses,” she said.
In March, Velma Trayham, CEO of the Arizona Black Chamber, said one of the organization’s pillars will be access and availability of capital, to educate people about the underwriting process and to partner with financial institutions to build a venture fund to help connect Black business owners with capital.
Black-owned businesses cluster in certain sectors in Arizona and other parts of the country.
“Arizona’s Black-owned businesses are most heavily represented in personal services, food services, household consumer goods manufacturing, and retail trade—industrial sectors that tend to have relatively lower financial and technical barriers to entry,” authors of the State of Black Business The Arizona report wrote, “This is not surprising considering the unique challenges around access to capital that this business demographic has historically faced.”
Augustus said these industries are similar to trends across the country for Black entrepreneurship.
The Alliance for Business Equity, which was formed in 2022 to encourage the economy to recover equitably, is working on a national policy platform to encourage black and minority entrepreneurship. The main pieces of the platform are expanding access to new markets, access to capital and developing entrepreneurs, Augustus said.
These ideas reflect Arizona’s plans, laid out by Trayham, who took office in mid-March. Trayham outlined her priorities for the organization at an event in March to introduce herself as the organization’s new leader.
“I believe that entrepreneurship is the engine for eliminating poverty,” Trayham said at the event.
Trayham said some of the Black Chamber’s focus areas will include increasing access to hiring opportunities, which are still lacking for minority-owned businesses. According to the Alliance for Entrepreneurial Equity study, Black-owned small businesses nationwide received only about 1.6% of available federal contracting dollars in 2022.
Contact the reporter at cvanek@arizonarepublic.com. Follow her on X, formerly Twitter, @Corina Vanek.
