Study Suggests Unique Challenges for Black-Owned Businesses, Black entrepreneurs and academics highlight significant funding obstacles as a major issue

Study Suggests Unique Challenges for Black-Owned Businesses Black entrepreneurs and academics highlight significant funding obstacles as a major issue

Although the number of Black-owned enterprises in Canada is increasing, they still constitute a small fraction of the country’s business landscape, generally smaller and less profitable than their counterparts. These findings emerge from a recent Statistics Canada study examining entrepreneurship among Black Canadians from 2001 to 2018.

The study, drawing on various reports, including census data spanning 2001 to 2016, the 2011 National Household Survey, and the 2018 Employer-Employee Dynamics Database, analyzed how the status of Black entrepreneurs evolved over nearly two decades. In 2018, there were approximately 66,880 Black-owned businesses in Canada, representing about 2.1% of the overall 3.1 million businesses.

While the census data indicates that 4.3% of Canadians identify as Black, Black-owned businesses face unique challenges. The majority, around 74%, are owned by men, and the self-employment rate increased from 1.8% at the study’s onset to 3.5% in 2018. However, the growth in self-employment was more pronounced among Black men compared to Black women.

Despite the growth of Black-owned businesses, the data suggests they are not maximizing their potential, being smaller and less profitable. Over 95% of unincorporated Black-owned businesses in Canada have fewer than one employee, and even among those considering incorporation, more than 91% have fewer than five employees.

The study also reveals earnings disparities. On average, Black male business owners earned $56,100, $9,500 less than their counterparts from other racialized groups and $43,300 less than the average white male business owner in 2018. Black women business owners earned the same as other racialized groups but $16,000 less than white women.

Black-owned businesses face challenges in profitability, with an average profit margin of 8.5%, compared to 14.9% for white-owned firms. While the study refrains from attributing this discrepancy solely to systemic disadvantages, it underscores the need for exploration.

Funding Challenges Carlton-James Osakwe, a business professor at Mount Royal University, points out systemic challenges hindering Black-owned businesses from realizing their full potential. Obtaining bank loans is particularly challenging, and Osakwe suggests that exploring the reasons behind this difficulty is essential.

In response to these challenges, the federal government established the Black Entrepreneurship Loan Fund in 2021, a $265-million commitment to provide entrepreneurs with loans of up to $250,000. While Osakwe acknowledges the positive steps taken, he emphasizes that funding remains a significant hurdle for many Black-owned businesses.

Beyond traditional funding sources like bank loans and government grants, Osakwe highlights the importance of “dealmakers” for small businesses. However, he notes that these dealmakers often come from predominantly white networks, limiting access for Black entrepreneurs.

Potential Solutions Lola Adeyemi, a successful entrepreneur, overcame these hurdles to establish her dream business, It’s Souper, a soup company. Adeyemi suggests that while programs like the Black Entrepreneurship Loan Fund are steps in the right direction, funding remains a critical challenge for many Black entrepreneurs.

Adeyemi emphasizes the importance of expanding beyond the Black community to access mentorship and support networks. She points out that the lack of visible success stories can be a significant barrier, and encourages Black entrepreneurs to seek guidance from diverse communities.

Sydonne Warren, an artist and muralist, shares her experience of building relationships that have been mutually beneficial for her business and others. She highlights the need for education on running successful businesses within the Black community, advocating for increased awareness and support to bridge existing gaps.

In summary, the study underscores the unique challenges faced by Black-owned businesses in Canada, particularly regarding funding and access to supportive networks. Initiatives like the Black Entrepreneurship Loan Fund and efforts to broaden mentorship opportunities are positive steps, but further exploration and action are needed to address the systemic barriers hindering the full potential of Black entrepreneurs.