Black women entrepreneurs are finding surprising and encouraging ways to leap across the funding gap that can hold back Black-owned businesses, according to a new survey by The BOW Collective.
Most business owners in the survey reported gross annual sales of over $250,000, which decreases the average revenue of non-minority women ($218,000) and minority women ($67,800), according to the 2021 Annual Business Survey commissioned by the U.S. Census Bureau.
But they didn’t start at the top. They had to launch without the access to capital available to other business owners in America.
What challenges do Black women entrepreneurs have to face?
Only 0.03 percent received third-party financing at startup. In fact, 95 percent of these Black women entrepreneurs used personal finances to launch their businesses. That risky route can result in high debt-to-income ratios that disqualify many for traditional business loans.
Their challenges aren’t isolated. Financing shortfalls are most common among Black-owned firms and least common among white-owned firms, reports the U.S. Federal Reserve Banks in their “Small Business Credit Survey: 2021 Report on Firms Owned by People of Color.”
Even after getting started, nearly all respondents were unable to leverage marketing and advertising to grow. A mere 13 percent of surveyed business owners used access to capital as a means for growth. Most relied on client referrals and networking relationships to grow their businesses.
“The lack of resources did not impair these businesses from growing,” said Nic Cober, Esq., President, of The BOW Collective. “It begs the question of where they would be if they had been properly capitalized and mentored from the start.”
About the BOW Collective
The Black Owner & Women’s Collective, also known as The BOW Collective, is an organization and sisterhood of the nation’s top 1 percent of Black Women Enterprises. “Business philanthropists,” members work together to bring awareness, business opportunities, and capital resources to black women enterprises.
The BOW Collective includes more than 100 members, who together project $450 million in gross annual sales in 2023 across 25 industries ranging from government contracting to the performing arts. In 2022, members created more than 1,500 jobs.
The funding gap is an issue present in both race and gender. Could the solution be in an unlikely place? Lauren Washington of Fundr thinks AI could help solve the gender funding gap. Click here to know how!