Blacks Facing Extra Startup Woes

A study finds African-American entrepreneurs have limited access to capital.

By Laura Palotie | 
 

On top of the usual challenges of launching a new business, black entrepreneurs frequently contend with a more limited access to capital, fewer sales and higher closure rates than white entrepreneurs, new research shows.

According to researchers at the University of California, Santa Cruz, and the Institute for the Study of Labor, African-American business owners are less likely to take out business loans or home equity lines.

Black entrepreneurs borrow an average of $31,000 to start new businesses, compared to $57,000 by white entrepreneurs, the study found. Roughly two-thirds of businesses owned by blacks launch with less than $5,000 in startup funds, while businesses owned by whites launch with between $25,000 to $100,000.

The research drew from 71 academic and Census Bureau studies published between 1992 and 2002.

Researchers blamed the imbalance on race-specific differences in income and net worth, as well as the possibility of lending discrimination.

 

Read more:

  • What You're Not Doing to Maximize Profit (But Should Be)
  • Redbox's Smart Move: What You Can Learn
  • What Makes a Company Resilient?

    • Sign-up for our Small Business Success Newsletter