Minority-owned small businesses in Georgia have historically faced unique challenges that are only further exacerbated by the coronavirus pandemic and its indisputable impact on the minority community over the last two years.
Long before the outbreak, minority business owners endured the racial wealth gap, which put them at a disadvantage for accumulating wealth and growing a successful business when compared to white business owners. Those economic barriers remain ever present today, especially when looking at the gaps in household wealth and the success rates of black-owned businesses in our very own city.
In Atlanta, the median household income for a white family is $83,722 compared to just $28,105 for a black family. The inequities continue for black entrepreneurs in the city where the average African American-owned business is valued at $58,085, nearly 11 times less than the average value of a white-owned business at $658,264.
When it comes to small business as a whole, the failure rate is daunting—with over 30 percent of businesses failing by their second year, according to the Small Business Administration—but for black business owners, failure odds are even greater, with eight in ten failing within the first 18 months.
The primary reason for the high fail rate is rooted in access to capital. A study by McKinsey & Company found that financial distress existed for minority small business owners prior to the coronavirus outbreak at a rate more than double that of white business owners. Worse, those businesses predisposed to financial hardship are three times as likely to close because of a two-month revenue shock than healthy businesses.
The virus has undoubtedly compounded the racial disparities and inequities in our community. At the height of the pandemic in 2020, the Federal Reserve Bank of New York reported that small business ownership in the U.S. dropped by 22 percent, but black ownership decreased the most—by a whopping 41 percent among all racial demographics with 53 percent of black business owners reporting a revenue drop of half since the start of the pandemic.
From their inception to pandemic survival, minority-owned businesses have had to withstand enormous obstacles, and with little aid from the government to help keep their doors open.
The government must act to end the disparities that minority entrepreneurs face, but the private sector must also play a role. Private investment, like Wells Fargo’s recent $20 million grant through its “Open for Business Fund” for United Way of Greater Atlanta, will be critical to the recovery of our great city’s economy. Through the grant, Wells Fargo is supporting the work of United Way, a nonprofit that focuses on creating equitable opportunities for those in Atlanta’s community to live a healthier life and have access to the resources they need to develop their skills, earn a living wage and achieve their full potential. Likewise, Capital One is supporting minority communities through $3.5 million in grant funding to close equity gaps in struggling communities, of which $500,000 will go to the Women’s Business Enterprise National Council (WBENC), a nonprofit dedicated to providing women-owned businesses the tools they need to succeed and whose southern headquarters are located in Georgia.
There is no one solution to the racial wealth gap. The obstacles that minority business owners face are deeply-rooted in discriminatory funding practices, and expanding access to resources for those who need it most will aid in Atlanta’s economic recovery and ensure an equitable, enduring and prosperous future for all Americans.
Hall formerly represented Georgia’s 5th Congressional District and served on the Atlanta City Council.
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