WASHINGTON DC – African-American entrepreneurs face a pretty challenging set of circumstances when it comes to starting businesses and accessing capital to start or grow a business says new research sponsored by the US Census Bureau.
New research shows that African-Americans still lag Caucasians in many categories of business ownership and growth. In 2000, roughly 11.4 percent of white workers were self-employed, compared to only 4.8 percent of African-American workers.
Meanwhile, these African-American-owned companies have lower sales, lower payrolls, and fewer employees than White or Asian-owned firms. Not surprisingly, these firms are also less profitable and more likely to close.
The researchers contend that these disparities result from a vicious cycle facing African-American entrepreneurs. They tend to start with significantly lower levels of wealth. This problem is further compounded by significant capital access barriers facing these new business owners.
Even when credit histories and other factors are controlled, African-American business owners are less likely to receive loans and more likely to avoid applying due to fear of denial. The researchers conclude that policy makers must take a variety of steps to reduce discrimination in credit markets.
They also support financial literacy and other business training programs for aspiring business owners as well as new initiatives, such as first-time home buyer support or individual development accounts that help individuals build assets that can be used to support new business ventures.
Access the December 2006 US Census Bureau Center for Economic Studies Working Paper by clicking on Papers.SSM.Com
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