Revenue Lag for Black Women Entrepreneurs
Recently, industry experts have been focusing on the revenue lag black women entrepreneurs have been experiencing. Typically, these women lack the resources and capital necessary to launch, yet they somehow manage to get their venture off the ground anyway.
Dell Gines, the author of a new report from the Federal Reserve Bank of Kansas City, Black Women Business StartUps, shared a favorite quote (attributed to Reid Hoffman, co-founder of LinkedIn): “An entrepreneur is someone who will jump off a cliff and assemble and airplane on the way down.” Gines quickly adds that, for black women entrepreneurs, “they do it with only a toothpick and a napkin”.
A recently commissioned report, The 2018 State of Women-Owned Business Report, has revealed a considerable gap. The number of women-owned businesses grew an impressive 58 percent from 2007 to 2018. Nearly three times that rate, companies owned by black women grew 164 percent. In fact, there are 2.4 million African American women-owned businesses in 2018. Most are owned by women 35 to 54.
Despite this growth, American Express says there is a gap – a widening gap – between the revenue for women of color and non-minority women-owned business. Firms owned by black women entrepreneurs experienced an average revenue drop from $84,000 in 2007 to $66,400 in 2018. The greatest revenue gap is between African American women-owned business’ and all women-owned businesses.
Gines commented that “The businesses tend to stay very small, and you don’t see a lot of scalability.”
Why? The biggest reason appears to be the difficulty black women have accessing credit. According to the Federal Reserve, they face capital constraints that make it hard to get the necessary funding to grow. As a result, black women entrepreneurs tend to tap into their personal savings.
BC Clark, director of business development at the Nebraska Enterprise Fund, a nonprofit based in Omaha that works with many black women business owners, explains, “We definitely do not want them to do that because it took years to build and they might not get the money back.”
Alternative lenders have also seen this problem and have stepped up to offer solutions. Many are now focusing on this need and offer a merchant cash advance. This funding solution is known for being fast and hassle-free, providing cash in as little as 24 hours.
Even with the obstacles they face, Gines has an optimistic outlook and says change is coming. “You are going to see a rise in black women doing business in professional services with the rapid increase in education levels for black women and their increased participation in the labor market, in fields such as accounting and engineering,” he says.
Author Bio: As the FAM account executive, Michael Hollis has funded millions by using merchant cash advance solutions. His experience and extensive knowledge of the industry has made him finance expert at First American Merchant.