Business ownership: In an equitable region, race and gender would not be barriers to starting a successful business.
Insights & Analyses
- Among firms with paid employees in the Five-County Bay Area, the rate of business ownership is 6 times higher for white workers compared with Black workers and 5 times higher compared with Latinx workers.
- The rate of business ownership in the Five-County Bay Area is over 2 times higher for male workers compared with female workers.
- Between 2007 and 2017, among firms with paid employees in the Five-County Bay Area, the rate of business ownership has increased for Black, Asian American, and White workers, and declined slightly for Latinx workers.
- The number of black firms with paid employees per 100 workers increased in Alameda, Marin, and San Francisco counties.
Drivers of Inequity
People of color are less likely than Whites to have access to capital and contracts to start and grow a business, due in part to historical policies such as redlining that denied home loans and wealth-building opportunities to people of color. Today, business loan denial rates for firms owned by people of color are three times higher than for firms owned by Whites. Business owners of color also pay higher interest rates and receive lower loan and equity investments. Although creditworthiness is a factor in loan denials, this metric does not reflect how reliably individuals pay their rent. Underrepresented groups also often face barriers accessing important networks and training programs.
Strengthen places: Policies to expand and sustain business ownership for all residents
- Increase access to resources to help underrepresented entrepreneurs build and repair credit and attract investment and loan capital to start and grow their businesses.
- Ensure access to affordable banking products, particularly those that can build credit history and scores – credit cards, credit lines, and bank-sponsored loans (not payday loans or other alternative financial products that don’t report to credit bureaus).
- Increase resources for businesses owned by people of color through Minority Business Development Agency (MBDA) Business Centers, which are charged with creating sustainable jobs within businesses owned and operated by entrepreneurs of color through services focused on access to capital, contracts, and markets.
- Connect aspiring entrepreneurs to business mentoring programs through government agencies and organizations such as the Network for Teaching Entrepreneurship
- Create dedicated incubators for entrepreneurs of color and women looking to start a business.
- Assess and fill gaps in the entrepreneurial ecosystem to support underrepresented entrepreneurs.
- Expand business opportunities through equitable procurement and contracting strategies.
- Close the racial wealth gap by increasing access to capital and government contracts for people of color.
- Implement sector-focused workforce training and placement programs that connect workers to growing industries.
Strategy in Action
Bay Area entrepreneurship supports are designed for underserved business owners and to curb persistent unemployment. ICA Fund Good Jobs provides high-quality business consulting services to support the growth of small- and mid-size companies located in high-unemployment areas of the San Francisco Bay Area. In 2019 alone, ICA Fund Good Jobs funded 143 small businesses which employ 547 workers. These jobs have an average hourly wage of $23.36. Of the businesses that ICA serves, 79% have management teams that are majority people of color and 93% that are majority women. Three-quarters of the businesses are owned by people of color and/or women. Learn more.
Photo: ICA Fund Good Jobs
- Organizations: Kapor Center, ICA Fund Good Jobs, Pacific Community Ventures
- Reports: A Policy Agenda for Closing the Racial Wage Gap; Including People of Color in the Promise of Entrepreneurship; Key Strategies to Advance Equitable Growth in Regions; The Color of Entrepreneurship; U.S. Minority-Owned Firms
- Data: Prosperity Now Scorecard; Federal Financial Institutions Examination Council