FACT SHEET | April 22, 2008

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) 

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.

DPC