Although active employment rates in North Carolina’s small businesses dropped broadly during the first six months of the COVID-19 pandemic, by the end of August the rate had returned to pre-COVID levels for White entrepreneurs, but was still down by 62% for Black business owners, a new study shows.
The study, from the National Community Reinvestment Coalition (NCRC), provided a national overview of COVID-19’s impact on entrepreneurship and a focused look on the Piedmont region of North Carolina, where 14% of all businesses are Black-owned. The study was commissioned by Piedmont Business Capital.
Nationally, African American business owners were hit the hardest by the recession, with 41% no longer working in April. This will likely increase the disparate ownership rates between Black and White entrepreneurs. Pre-COVID, only 9.5% of business owners were Black and only 2.1% of firms with employees were owned by African Americans despite making up nearly 13% of the population. On the other hand, nearly 71% of all businesses and 81.6% of firms with employees had White owners.
The study found comparable rates in the Piedmont region. African Americans comprised 22% of the region’s population, but owned just 14% of the businesses.
There was also significant disparity in revenue rates for White and Black business owners, both nationally and in the Piedmont region. Using data from the U.S. Census Bureau’s 2012 Survey of Business Owners, nationally, the average business revenue for African Americans was $73,000 in 2012, compared to $642,000 for Whites.
In the Greensboro-High Point area of North Carolina’s Piedmont region, average Black business revenue of $53,363 was only 9% of White business revenue. Total revenue for all Black firms across the nation was about $450 billion in 2012, just 1% of the $33 trillion total revenue for White-owned businesses.
“Decades of economic discrimination and disenfranchisement of the nation’s Black communities has resulted in the ever growing racial wealth divide,” said Dedrick Asante-Muhammad, NCRC’s Chief of Race, Wealth and Community. “In terms of entrepreneurship, this lack of capital at the individual level and throughout the African American community greatly increases the barriers to successful entrepreneurship.”
“Increasing ownership is the pathway to changing economic disparity in this country,” said Wilson Lester, Executive Director of Piedmont Business Capital. “The slippage of economic position due to the global pandemic has threatened Black and Brown-owned businesses in the Piedmont significantly.
Data communicates that Black communities historically are the first to be challenged by troubled economies and are generally the last to recover. As a community, we have to decide what we are going to do about that.”
The study also identified problems that are specific to Black entrepreneurship. For example, despite having less wealth, African Americans are more likely to use personal funds to aid their business through financial hardship. Lower levels of wealth also greatly limits the ability of African Americans to self-capitalize into entrepreneurship or support Black entrepreneurs who want Black customers as their base.
To read the full report:
Community support provided by:
C Bradley Hunt
For more information about the Piedmont region, please contact:
Executive Director of Action Greensboro