YOUNGSTOWN — A minority-owned business is less likely to have access to the capital needed to grow its business, according to the Federal Reserve Bank’s annual Small Business Credit Survey.
At a Cleveland Federal Reserve Fed Talk last week, a panel discussed the disparity in the availability of capital for small businesses, which can differ by gender, race and region.
Maria Thompson, head of outreach at the Federal Reserve Bank in Cleveland, provided survey results to support those concerns. Thompson said while revenue performance improved in 2021 from pandemic year lows, 48% of small businesses saw revenue decline in 2021 with an additional 14% unchanged. More than half of the companies that responded indicated that their financial situation was fair or poor.
Among those in poor financial condition, minority businesses were the most struggling – 81% of Asian-owned businesses, 76% of Black-owned businesses, 74% of Hispanic-owned businesses, and 55% of Black-owned businesses. Whites.
But minority-owned businesses seeking commercial funding were less likely to receive all the funding sought in 2021, even less than before the pandemic in 2019 – just 15% of Asian businesses compared to 34% in 2019; 16% of Black-owned businesses compared to 26% in 2019; and 19% of Hispanic-owned businesses compared to 32% in 2019. White businesses also received less funding 35% in 2021 compared to 54% in 2019.
“Based on this information, we still have a lot of work to do,” said Tiffany Jordan, contract compliance manager for the Northeast Ohio Regional Sewer District and one of the panelists.
Christopher Nance, vice president of building and inclusive talent initiatives for the Greater Cleveland Partnership agreed. Statistically, he said if all 24,000 minority-owned businesses in the Cleveland area could add just one employee each, unemployment in the area would be cut in half.
“That’s how essential minority-owned businesses are to the life of this community,” Nance said.
Still, he said there hasn’t been much growth in the construction development industry for minority-owned businesses.
While minority neighborhoods can pay a lot of taxes, Nance said, when it comes to PEP loans, they mostly went to majority communities while minority communities were neglected.
Thompson added that there is a common misconception that the financial shortcomings of minority-owned businesses are addressed by programs, but the data doesn’t really show that.
Another misconception noted by Jordan is that small minority-owned businesses are not able to provide the same quality work as large businesses. She notes that every business is capable of making mistakes, but a small business is also capable of fixing them.
Additionally, Jordan said that not all minority-owned small businesses are just starting up. Many have been in the family for generations.
With a major 10-year project underway, the Northeast Ohio Sewer District used minority-owned commercial contracts 30% of the time, which Nance says is intentional. Before the pandemic, the sewer district held open houses and invited all businesses to come and find out how they can work with them.
Teleange Thomas, director of operations and relationships at JumpStart Inc., said these are partnerships and events that allow small businesses to build relationships with customers and financial agents. JumpStart’s business advisors help women and minority-owned businesses navigate the growth process to get where they want to be.
Similarly, Nance said the Greater Cleveland Partnership requires business owners to be transparent and let them know what resources they may be lacking, and then work to strengthen those areas.
While JumpStart worked with 37 small businesses last year, with 68% black-owned and 72% women-owned, Thomas said there needed to be more options for people find the best solution for their business, as well as the capital, services and support they need.
“I think sometimes small businesses just don’t know where to go,” Jordan added.
Small businesses are considered to be those with less than 500 employees, which represents the majority of businesses in the country. Half of the jobs are in companies with fewer than 500 employees and 75% of companies have fewer than 10 employees.
More than 17,000 small businesses participated in the 2021 SBCS. The Federal Reserve invites all small business owners and business leaders to participate in the upcoming 2022 SBCS survey at fedsmallbusiness.org/survey through November 4.
Copyright 2022 The Business Journal, Youngstown, Ohio.