3 Reasons Why Our System is Working Against Black-Owned Businesses

Why it’s important to spread the love as a consumer

Alright, let’s get one thing straight; I’m coming at this topic with a lot of privilege. Not only in my race, but in my gender, wealth, and basically everything else that being a straight white male affords me.

I have no intention to represent people of colour or speak on their behalf. I’m writing from my perspective on why I believe this is an issue and should be addressed.

I firmly think it is our, the privileged individuals' job, to amplify the message that our society is failing marginalized people.

“We must always take sides. Neutrality helps the oppressor, never the victim. Silence encourages the tormentor, never the tormented. The opposite of love is not hate, it’s indifference.” — Elie Wiesel

With all of this in mind, let’s dive in.

In retaliation to this summer's horrific events, we saw many worldwide movements gain traction to support people of colour. However, with these momentous demands for progressive change came momentous pushback.

I now see the question of why we, as individuals, should go out of our way to support black-owned businesses. The argument being that consumerism, for the majority of people, is a non-discriminatory act. Basically, most end, consumers primarily care about the product and not necessarily where it comes from.

Barring the obvious fact that many people do actively discriminate through their consumer choices, I can see the logic in the argument.

So, when progressive change comes along and states race should influence your buying decision, it feels discriminatory. Now, we are actively injecting race as a factor. Many consumers who just want the best product for the best price don’t think race should be considered.

However, there are two reasons why I think this is wrong, and race should be a factor in your buying decision. First, I believe it is entirely possible and valid to support multiple demographics. You can certainly buy from white-owned businesses, you can buy from small businesses, and you can buy from big businesses.

However, progressive change is now asking you to actively include black-owned businesses in that list. Don’t think of it as exclusion, but instead, inclusion.

Secondly, while black-owned businesses may not suffer from your individualistic decisions, they are certainly systemically oppressed. Systemic oppression is the underlining reason you should support black-owned businesses. It can be summarized in these three points.

#1: Black Families Have A Lot Less Starting Capital

When you open a business, you need upfront cash to invest in it. There are different methods to accumulate this money, but the easiest is to dip into your own savings.

You can also raise the money or try to earn public funding, but raising money is an incredibly time-consuming task. Public funding isn’t exactly a great avenue for black-owned businesses either (see point #2.)

So that leaves people forced to use their savings, which puts black-owned businesses at an incredible disadvantage right out of the gate. This is because, on average, people of colour historically find themselves strapped for cash.

According to the Economic Policy Institute, 2017 study, white families’ average household net worth is $678,737 over black families’ net worth of $95,261.

This insanely large gap makes it much more difficult for black businesses to build a business successfully from the ground up using their money; thus, they need support.

And before you say, well, if you don’t have the money, you shouldn’t open a business, understand that way of thinking is what created the wealth gap in the first place. Less opportunity is, again, a systemic issue.

#2: Minority-Owned Businesses Suffer from Poor Public Funding

While many black-owned businesses don’t have the capital to build and grow a small business into a success, the issue doesn’t stop there. Covid-19 has been hard on everyone, but it has really shined a spotlight on the surprising lack of institutional support for already struggling groups.

Ashley Harrington, the director of federal advocacy for the Centre for Responsible Lending (a non-profit working to remove predatory lending), says in an ABC article:

“We estimate that upwards of 90% of businesses owned by people of color have been, or will likely be, shut out of the Paycheck Protection Program,”

The article explains many institutions prioritize existing customers, forcing the small businesses with no credit relationship to wait longer, thus going without access to any funds.

Additionally, it’s reported that 51% of Black and Latin small business owners apply for less than $20,000 when it comes to small business assistance. Still, only 12% say they received the full amount of assistance requested.

These are not one-off situations; they are, in fact, trends in our system. There is ample evidence proving that black-owned businesses have extreme difficulty earning funding to stay afloat, reinforcing a rigged system.

#3: Black Businesses Recieve A Lot Less Consumer Attention

Due to the lack of starting capital, it can be difficult for people of colour to build businesses in high traffic areas, starting their businesses in low traffic, infrequently visited spots.

This leads to the business being less visible and will drastically lower tourism and consumerism for the business, putting black businesses at another disadvantage.

According to a 2020 report by JP Morgan Chase, black-owned businesses rarely make much of a profit. Specifically, less than 1% of these businesses have a profit of over 20%.

This statistic alone should explain that black-owned businesses need your support, especially when you add that over 40% of white-owned businesses make over the same, 20% profit.

With less traffic, poorer visibility, and no infrastructure support, black-owned businesses find themselves at a severe disadvantage, originating from the fact they can’t obtain or don’t have the proper funding to get started.

This is a systemic oppression. It’s why people need to go out of their way and make consumer choices that help lift these businesses up from injustice pushing them down.

If you’re sitting at home saying to yourself, I’m nice to people of colour, so, therefore, I am not a part of this racist system, you need to re-evaluate. To not act against systemic racism is to accept the world without change, which doesn’t get society anywhere in terms of real progress.

There are many ways to act. I encourage you to do your own research to learn how you can be a part of the solution but remember to support black-owned businesses while you’re at it.