Senate Democrats

African-American Small Businesses: Diversity, Economic Growth, and Job Creation in America

America’s small businesses are the backbone of our economy, helping to keep the country competitive through innovation and new ideas. Democrats recognize that one of our nation’s greatest assets is our diversity. Investing in minority businesses, therefore, helps to increase the value of that asset and to promote economic growth and job creation.

African-American small business enterprises are growing. Over the last 10 years, minority business enterprises accounted for over 50 percent of the two million new businesses started in the United States, crossing every industrial sector from financial services and health care to construction and transportation. Today there are more than four million minority-owned companies in the country with annual sales totaling $694 billion. Between 1997 and 2002, the number of African American-owned firms increased by 45 percent. More than half of African American-owned businesses had less than $10,000 in business receipts in 2002. Black-owned firms, however, had the highest growth rates in terms of number of firms and receipts between 1997-2002. (SBA Office of Advocacy, 4/2007)

African-Americans own five percent of all U.S. firms. There are 1.2 million African-American-owned firms in the United States, supporting 753,978 employees.

A state-by-state report on the number of African-American small businesses is attached in Appendix A.

Minority-owned firms, however, make significantly less than their non-minority counterparts. The average gross receipts of minority firms were $162,000 – considerably lower than the $448,000 average gross receipts of non-minority firms. On average, for every dollar that a White-owned firm made, Black-owned businesses made 43 cents; Pacific Islander-owned firms made about 59 cents; and Hispanic-, Native American-, and Asian-owned businesses made 56 cents, according the Small Business Administration (SBA) (SBA Office of Advocacy, 4/2007).

African-American-owned firms receive a disproportionately low percentage of government-backed business loans. African-Americans represent 13.4 percent of the U.S. population. (Census Bureau, 12/2007) The amount of government-backed loans to African American small business owners have generally remained stagnant and percentage-wise remain well below their percentage of the general population. Last year, African Americans received only nine percent of 7(a) loans – the government’s largest loan program for working capital – and only 5 percent of total dollars lent. Proportionally, more African Americans benefit from the Microloan Program ($35,000 or less). About one-third of all microloans go to African American small business owners. (SBA)

The Small Business Administration should be a resource for minority-owned firms. The SBA is supposed to reach out to more minorities, women and other underserved communities to market their financing, contracting, and training programs. For the last seven years, however, the Bush Administration has not made helping underserved communities a priority.

The continuing disparity between the number and earnings of minority firms in the United States and the continuing barriers many minorities face as they seek to start or expand a business demonstrates the need for targeted programs at the federal level for minority entrepreneurs. Despite signs that small businesses are facing increasingly difficult market conditions, President Bush’s Fiscal Year 2009 budget proposal for the SBA raises fees on loans, provides no funding for microloans, fails to invest in more contracting oversight, and cuts funding for key business assistance programs like Women’s Business Centers and Small Business Development Centers. 

Appendix A

African-American-Owned Small Businesses

State

# Small Businesses

Jobs

Income

African-American-Owned
Small Businesses

UNITED STATES

26,800,000

58.6 million

$992.5 billion

1,200,000

Alabama

368,500

826,200

$10.6 billion

28,700

Alaska

67,300

132,700

$2.4 billion

900

Arizona

473,000

1,000,000

$15.1 billion

6,300

Arkansas

247,700

499,800

$6.0 billion

8,900

California

3,675,700

6,900,000

$151 billion

112,900

Colorado

550,100

991,900

25.4 billion

7,100

Connecticut

347,600

774,800

$18.8 billion

10,300

Delaware

76,300

180,000

$2.5 billion

4,300

District of Columbia

65,200

207,200

$4.2 billion

12,200

Florida

1,942,200

3,100,000

$39.2 billion

102,100

Georgia

859,500

1,600,000

$25.6 billion

90,500

Hawaii

117,200

268,900

$3.1 billion

800

Idaho

151,300

284,700

$4.5 billion

400

Illinois

1,121,300

2,600,000

$42.5 billion

68,700

Indiana

486,400

1,300,000

$14.7 billion

14,100

Iowa

261,800

660,400

$6.4 billion

1,600

Kansas

246,900

609,800

$8.8 billion

4,500

Kentucky

346,200

759,200

$8.5 billion

7,600

Louisiana

364,900

895,600

$10.6 billion

40,200

Maine

154,000

302,700

$3.4 billion

300

Maryland

536,200

1,100,000

$16.8 billion

69,400

Massachusetts

651,100

1,500,000

$24.8 billion

12,800

Michigan

849,500

2,000,000

$28.4 billion

44,400

Minnesota

504,000

1,200,000

$13.1 billion

7,800

Mississippi

216,700

473,000

$5.8 billion

25,000

Missouri

508,900

1,200,000

$14.5 billion

16,800

Montana

115,700

224,700

$3.1 billion

200

Nebraska

161,800

400,700

$5.0 billion

2,100

Nevada

215,800

453,100

$6.7 billion

4,300

New Hampshire

145,900

311,500

$4.7 billion

500

New Jersey

828,400

1,800,000

$34.9 billion

36,300

New Mexico

158,200

338,700

$4.6 billion

1,500

New York

1,925,100

3,900,000

$85.4 billion

129,300

North Carolina

766,500

1,600,000

$19.1 billion

52,100

North Dakota

63,100

167,700

$1.7 billion

100

Ohio

920,500

2,400,000

$26.9 billion

35,700

Oklahoma

332,000

656,000

$16.4 billion

7,400

Oregon

350,500

771,400

$10.3 billion

2,200

Pennsylvania

1,006,900

77,800

$39.9 billion

24,800

Rhode Island

101,800

252,900

$2.8 billion

100

South Carolina

352,900

780,800

$8.1 billion

28,600

South Dakota

79,100

195,700

$2.3 billion

100

Tennessee

531,200

1,100,000

$23.3 billion

26,800

Texas

2,093,400

3,900,000

$122.6 billion

88,800

Utah

236,000

467,200

$7.0 billion

600

Vermont

80,300

162,800

$1.7 billion

200

Virginia

643,600

1,500,000

$20.7 billion

41,100

Washington

578,300

1,300,000

$19.4 billion

7,000

West Virginia

125,300

313,600

$3.6 billion

1,500

Wisconsin

447,200

1,300,000

$12.1 billion

6,700

Wyoming

61,900

129,000

$2.4 billion

100

Source: SBA Office of Advocacy, 2007. Minority-owned business data are from 2002, the most recent data available from SBA and the Department of Commerce. Statewide figures are from 2006, the most recent data available from SBA and the Department of Labor.

Bookmark and Share