Challenges New Black Business Owners Face in 2021

What are these challenges and out do I overcome them?

It’s a new year and many black business owners are facing both old and new challenges. There was an increase in support for black-owned businesses after the surge in support for the Black Lives Matter movement starting June of 2020. In fact, 75% of black-owned businesses have said that they have seen an increase in sales in the months following the murder of George Floyd and subsequent events, which is a welcomed benefit to a dark time in our nation’s history. The downside is that 76% of black-owned businesses said that COVID-19 has been a detriment, according to a study by the National Black Chamber of Commerce (NBCC).

Starting a business in 2021 brings its own challenges, no matter who you are. Being a black business owner means having to navigate through challenges that white business owners usually do not face. Despite having to learn how to be a business owner, get customers, and make money, you also have to face bias, networking struggles, funding issues, and COVID-19, in a system that is working against you. Below are some of the struggles Black business owners face in 2021 and some suggestions for ways to work through them.

Racism and Bias

Fifty-nine percent of black business owners reported that they have been the victims of racism or bias when starting their new business. This statistic is staggering, but not as grim as the fact that Black business owners also feel that they are taken less seriously during their start-up. This can add increased challenges and stress when making meaningful business connections and soliciting customers. So how can you overcome this?

While the battle against racism and bias is ongoing, forming connections with other business owners of color can help your small business make meaningful connections without the worry of discrimination. Seek out other ways black businesses are already supporting each other and get in on the action.

There are several websites that offer digital directories of black-owned businesses in your area. If you are opening your business in NC, check out Black Dollar, which lists black-owned businesses all over the state.

Eighty percent of black business owners, interviewed by NBCC, said that they were proud to be black business owners, and there’s no reason not to be! Be proud of your accomplishments and keep pushing forward.

Networking Issues

Networking is a necessary part of starting any business. Making organic connections can be challenging and overwhelming, which is why networking within your niche is a great way to reach more customers and make meaningful business connections.

Networking as a black business owner can be especially difficult because of conscious and unconscious bias.

When faced with challenges, you can lean on a community of people that you have created for yourself. In the beginning, you can use social media or online forums to ask your fellow black business owners for help with challenges you are facing: financial, legal, or emotional.

Black business owners can find spaces that work on building up small businesses, with a focus on minority businesses in particular. Coworking spaces, like The Wright Village, are great ways to meet others that may have advice, strategies, or skills that you may not possess, and they develop their own personality over time.

Find the one that is the right fit for your business and demographic and let those connections flourish. Having other entrepreneurs in your corner can improve all businesses involved, especially with finding ways to deal with issues that only black-business owners face.

Access to Funding

Starting a new business can quickly become wildly expensive, so obtaining funding is definitely a priority for most small business owners. In an ideal world, it is best to put up your own capital for a new business, even if it’s only a small amount.

When you finance your own business, you can start out with less debt and save on interest, but this kind of funding can be very difficult for new small business owners.

Asking friends and family to loan you the money is one option (if you have friends and family that are willing and able and willing to contribute). Grants are also available for groups, such as minorities, veterans, women, and women of color who want to start a new, small business.

Apply for as many as you can! It may seem overwhelming at first and there can be a lot of hoops to jump through, but it could be the key to being able to afford to start your business. If you’re struggling, find someone in your network who has been through the process or has experience with grant writing. Whatever you do, don’t give up!

If you have good enough credit, a small business loan can be obtained from a bank. However, proceed with caution. A study by the Minority Business Development Agency (MBDA) showed small business owners of color tend to have higher interest rates on loans. They are also more likely to be denied credit when compared to white business owners, but there are ways to improve your chances of obtaining a small business loan.

First, ensure that you have a detailed and sustainable business plan. A bank will want to see that they are investing wisely.

Next, don’t get discouraged. If one bank declines to invest in your business, try another bank. Do your research on different banks and their small business loan programs. Seek out others in your network who have obtained small business loans for advice.

Third, you could ask for a smaller loan and find ways to save capital or cut costs in the beginning. Utilize a coworking space, rather than renting office space. When considering equipment, examine the used equipment market to reduce costs. Barter with other business owners and customers, so multiple parties get what they need.

Lastly, you can get a co-signer on the loan. A co-signer is someone that is also responsible for paying back the loan if you default. This could be a relative or close friend who believes in the vision for your business. This person would typically have better credit than you, which would mean less risk for the bank and more money for your new business.

COVID-19 and Social Distancing

COVID-19 has added a new level of difficulty for all new businesses, especially any that have face-to-face contact with customers. It has also hit minority populations harder than whites.

The best way to adapt to this unique challenge is to understand specifically how the regulations relate to your new business. Guidelines and strategies can be found on the CDC website. Customers and employees are trusting you to have a safe and healthy business and it’s your responsibility to establish and maintain that. At the very least, require mask-wearing, abide by social distancing guidelines, and get vaccinated as soon as possible. You and your customers are in this together.

Starting a new business can be exciting and scary, along with a rollercoaster of other emotions. Unfortunately, there are a variety of hurdles that black business owners must clear that just aren’t in the path of their white counterparts. We have outlined a few of the challenges black business owners face in 2021 and how to overcome them. Good luck and godspeed!

Let us know how your journey is coming!