Black Entrepreneurship Was on the Rise in 2021 and These States Are the Most Fruitful
Despite persisting societal barriers and a global pandemic, Black entrepreneurship is significantly on the rise, according to a new report. And a new study shows that states in the Mid-Atlantic pocket of Virginia, Maryland and Delaware provide the best environment for Black businesses to thrive.
Merchant Maverick’s report, Best States For Black Entrepreneurs In 2022, finds that Black-owned businesses grew an astonishing 38% between February 2020 and August 2021, according to UC Santa Cruz research, even while white and Asian businesses fell by 3% and 2%, respectively.
In addition, the report, citing the Kauffman Foundation, found that “more Black Americans started businesses during COVID-riddled 2020 than in any of the previous 25 years.”
The report notes, however, that Black-owned businesses make up just 2.3% of the employer businesses in the U.S., a far cry from the 14.2% of the population Black Americans represent — as funding gaps only highlight this discrepancy.
Jared Beilby, Merchant Maverick special projects editor, told GOBankingRates that 2.3% of the employer businesses in the U.S. being Black-owned business is a shockingly low number.
“This becomes especially obvious when considering that Black Americans make up over 14% of the overall population,” Beilby said. “Ideally, those numbers would be more in sync with one another. A large gap like the one that exists indicates there is an unequal playing field for entrepreneurs throughout the country.”
Beilby added that there is a large funding gap that Black entrepreneurs must overcome. For example, he said, a Fed survey found that Black businesses receive funding at about one-third the rate of white businesses.
“There’s also a large systemic component. The fact remains that white entrepreneurs have access to more resources and larger support networks. Such systemic problems will naturally lead to fewer Black businesses overall,” he said.
In terms of states, the report found that the Mid-Atlantic pocket of Virginia, Maryland and Delaware is particularly fruitful for Black entrepreneurs, as the trio garnered spots 1, 2 and 5, respectively.
“We found that this region has a healthy mix of local government and private initiatives to help foster Black-owned business, as well as a sizable Black population,” Beilby said. “These states have also performed well in some of our other data reports, indicating that the Mid-Atlantic is great for small business in general, and not just Black entrepreneurs.”
Beilby added that Virginia was solid across all metrics in the study, as the state ranks high in terms of the number of Black-owned businesses per capita and the percentage of the state’s workforce employed by Black-run businesses.
“We were also impressed with how the state government runs a minority-focused directory of small businesses. When compared to other states, it’s difficult to knock Virginia. The state just posts solid numbers across the board, and its initiatives can help encourage even more growth,” he said.
As for Maryland, Beilby said it “runs basically neck-and-neck with Virginia.”
“Beyond the metrics, Maryland’s state government offers tools and resources to help minority entrepreneurs grow their business. When you look at all the factors that make Maryland an excellent place for Black businesses, it’s hard to pick just one,” he added.
“Delaware is the weakest of the three in the region, but it’s still no slouch,” Beilby said. “It’s got similarly high metrics to both Virginia and Maryland, but it’s just not quite on the same level.”
For instance, he said that Delaware ranks 4th for its share of the workforce employed by Black-run businesses and 6th when looking at Black business owners per capita. “But compared to the rest of the country, Delaware is one of the best states for Black entrepreneurs. And the state’s Black Chamber of Business began in 2020, which could further foster Black entrepreneurs in the state,” he added.
Rounding up the top 10 states, Texas is at number 3, Nevada is at number 4, followed by Delaware, North Carolina, Ohio, New Mexico, Georgia and Alabama.
On the other hand, the report finds that the worst states for Black entrepreneurs include Alaska, Utah, South Dakota, Montana and Vermont.
In terms of the 2022 outlook, Beilby said that Black entrepreneurship will continue to grow throughout 2022.
“While the Omicron variant has left a negative note over the past couple of months, if we, as a country, can learn to live with the virus, this will undoubtedly contribute to a boost in business across all demographics,” he said. “If that happens during 2022, an across-the-board uptick in the economy will certainly help out Black-owned businesses, too.”
More From GOBankingRates
- GOBankingRates’ Best Banks of 2022: Live Richer by Banking Better
- Gen Z and Millennials Favor National and Online Banks, Survey Shows — What Does That Mean for the Future of Credit Unions?
- How Has COVID-19 Impacted The 2022 Tax Season?
- 40% of Women Have Less Than $100 in Their Savings Accounts, New Survey Finds