Small Businesses

Small businesses owned by people of color own 4.1 million firms that generate $694 billion in revenues and employ 4.8 million people.  However, there continues to be a large gap between minority and white small business ownership and profit:[1]

• Latinos owned 6.6 percent of all U.S. businesses; Blacks, 5 percent; Asians, 4.6 percent; American Indians or Alaska Natives, 0.8 percent; and Native Hawaiian or other Pacific Islanders, 0.1 percent. Whites own 82.9% of all businesses, and 88% of all employer firms.
• On average, for every dollar that a White-owned firm made, Pacific Islander-owned firms made about 59 cents, Latino-, Native American-, and Asian-owned businesses made 56 cents, and Black-owned businesses made 43 cents.

During a time in which communities of color are experiencing unemployment rates of 11% and are projected to experience 15.5% unemployment by 2010,[2] small businesses create jobs in communities of color and are key to economic recovery.  In fact, small businesses provide the majority of the jobs in the US,[3]

• Representing 99.7% of all employer firms in the US
• Generating 64% of net new jobs over the past 15 years
• Paying 44% of the total US payroll

Of 119.9 million nonfarm private sector workers in 2006, small firms with fewer than 500 workers employed 60.2 million and large firms employed 59.7 million people. Firms with fewer than 20 employees employed 21.6 million.

[1] Source: Minorities in Business: A Demographic Review of Minority Business Ownership, 2007 http://www.sba.gov/advo/research/rs298tot.pdf

[2] State of the Dream 2009, United for a Fair Economy

[3] U.S. Dept. of Commerce, Bureau of the Census: Statistics of U.S. Businesses, Current Population Survey via the SBA Frequently asked questions 2007  http://www.sba.gov/advo/stats/sbfaq.pdf)

Related Publications

Greenlining produces an annual report that rates the major SBA-lending institutions in the nation in terms of the loans they originate to African Americans, Latinos, and Asian Americans:

SBA Fiscal Year 2008 Report
This report card provides data for the best and the worst banks of 2008 in Small Business Administration (SBA) lending to minority-owned small businesses.  The number of SBA loans has decreased by 30.3% nationally, including a 39.3% decline in California, due chiefly to the contraction in available credit across the economy.  However, the SBA's inability to maintain the competitiveness of its loan products compared to proprietary bank loans may have also contributed to the decline in SBA lending.  Nonetheless, the SBA shows promise for improvement under the Obama Administration.

SBA Fiscal Year 2007 Report
FISCAL YEAR 2007 UPDATE.  The number of minority-owned businesses in the US is growing at two to three times the national average, yet the proportion of Small Business Association loans going to minority entrepreneurs has remained constant at about one-third of all loans.  In this report card , we rank the banks on their lending performance to minority-owned small businesses.  We also provide an update on the SBA under the Bush Administration, as well as recent problems that have undermined the agency's credibility and effectiveness.

Financial Institutions May Soon be Required to Report Business Loans by Race, Ethnicity and Gender

Regulation B is a Federal Reserve regulation that prevents bankers from collecting race and ethnicity data from potential borrowers.  Passed during the Civil Rights Era, the logic of the regulation was to prevent discrimination based on race.  However, by not collecting race and ethnic data from borrowers, the general public has no way of knowing whether banks are making loans to people of color.  This piece reflects Greenlining's position that Regulation B should be repealed.

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