Black entrepreneurs in New York think banking system is closed to them
Over 60% of startup owners and 40% of established business owners surveyed were unable to secure a bank loan or institutional capital from a finance company between 2015 and 2020. Additionally, around 80% of startups surveyed had incomes of less than $ 50,000.
The survey found that there were great challenges among black entrepreneurs in acquiring capital from financial institutions. More than half (55%) of startup owners surveyed said they did not have an established relationship with a financial institution.
“I’m currently partnering with different nonprofits and different minority run organizations… but in terms of financial investors, this is something I’m still working on at the moment,” said Curtis Cox, who launched a career counseling and coaching service. two years ago. Cox did not participate in the investigation.
Hope Knight, president and CEO of Greater Jamaica Development Corp., said she believes credit rating issues for black entrepreneurs and the inability to provide sufficient collateral to secure a large-scale loan are linked to the lack of historical relationship between blacks. and traditional financial institutions.
“Black Americans have been denied opportunities to strengthen their economic security,” she said.
Another problem facing black entrepreneurs in New York is the inability to increase their income stream. About one-third of business owners surveyed had incomes below $ 10,000 at the end of 2018, and 15% earned between $ 10,000 and $ 50,000.
Almost 70% of those polled said that their low amount of income was their main obstacle to obtaining financing from a traditional bank. Black entrepreneurs often find it difficult to obtain loans from these institutions because they are considered to operate with a higher degree of risk than more established businesses, explained James H. Bason, President and CEO of TruFund. Financial. Lack of cash flow can hamper the ability of black homeowners to find new customers and sources of income, experts say.
“When you can’t access capital, you’re so overwhelmed that you don’t have the energy to target different areas,” said Dr Selma Bartholomew, owner of Legacy Pathways, an education consultancy in the field. Bronx, who did not participate in the investigation. “If we can’t grow our business, we can’t meet the thresholds that serve as barriers and glass ceilings to that growth. “
The survey also pointed out that of the $ 3.4 billion in city contracts awarded to minority and women-owned businesses, only 1% went to black-owned businesses, a statistic previously reported by Crain’s.
On a positive note, Knight said she has seen more efforts from government agencies and the private sector to reach out to black entrepreneurs and business owners since the start of the pandemic.
“I have never seen so many black companies get contracts and opportunities as I have in the past 18 months,” she said. “I think the death of George Floyd and the racial calculation brought to light the fact that black businesses have been underutilized and have not necessarily had opportunities for them to grow and prosper.”