Black women-owned businesses are up by 258 percent
18th August 2014 · 0 Comments
By Jazelle Hunt
NNPA Washington Correspondent
WASHINGTON (NNPA) — From the rubble of the Great Recession, women business owners are emerging victorious with record growth and economic impact. Even so, women entrepreneurs still face barriers to success.
Today, 30 percent of all American businesses have a woman at the helm. African-American women in particular are a driving force, establishing their enterprises at six times the national average, according to a 2013 American Express OPEN report. Between 1997 and 2013, African-American women-owned businesses grew by 258 percent and made $226.8 billion in revenue. They employ 1.4 million people, which is more than the combined population of Atlanta, St. Louis and Miami.
Another study from the Global Initiative for Women’s Entrepreneurial Research found that by 2009, women-owned businesses supplied 23 million jobs – or 16 percent of all jobs available at the time – with an economic impact of $3 trillion. In terms of job growth, women owned businesses rank second only to publicly traded companies.
But available data suggests there is much more unearthed potential.
“While women-owned businesses are the fastest-growing segment of businesses, and many succeed, women must overcome barriers that their male competitors do not face,” a report from the U.S. Senate Committee on Small Business and Entrepreneurship state. The committee held a hearing recently at which it released the report and discuss its findings. “In the area of capital, studies find that women do not get sufficient access to loans and venture capital.”
Some of turned rampant unemployment into an opportunity.
In 2002, Karen Lawrence was laid off in the post-9/11 recession. Tired of fighting to get back into the corporate world, she channeled her event management skills into a startup. Using her savings and severance package, she launched It’s My Affair, LLC.
“It wasn’t enough. But I started small,” Lawrence says. “Getting people to take you seriously as a business owner, especially when you’re small, is the hardest part.”
Despite excelling with the opportunities given, women entrepreneurs still face obstacles echoing from decades of codified sexism. Chief among these obstacles is access to capital. For example, a study from the Ewing Marion Kaufman Foundation found that women receive 80 percent less capital than men for first-year financing.
The Senate committee report also points out that women-owned small businesses (WOSBs) represent 30 percent of all small businesses, but only 17 percent of U.S. Small Business Administration loans went to women entrepreneurs. And this may be their best opportunity to access funds; the SBA says women are three to five times more likely to be approved for an SBA loan than for a conventional loan.
Government contracts offer another example of WOSBs’ restricted access to lucrative opportunities.
Federal contracting opportunities amount to approximately $500 billion worth of business. Sometimes, small businesses are able to get a shot at this money by providing services to government agencies through sole source authority. This authority lets federal entities bypass the bidding or application process and award contracts that pay up to $6.5 million for manufacturing, or $4 million for other industries, to one business. Currently, 15 percent of small business awards are granted to disadvantaged businesses using this authority.
The WOSB Procurement Program was established in 2000 to help federal agencies funnel contracts to WOSBs/economically-disadvantaged WOSBs. Of seven similar procurement programs for disadvantaged businesses, the WOSB Procurement Program is the only one that does not have sole source authority. Even if they have the capacity to handle these big-money contracts alone, WOSBs can only subcontract on them, thus splitting the earnings with other firms.
“It’s very hard to compete when you have to compete with large corporations and firms that have already done business with the government. I don’t think they look at small business owners,” Lawrence says of her experience with federal contracting.
The goal of the WOSB Procurement Program was to have five percent of all federal contract dollars awarded to WOSBs. The federal government has never hit this goal. It came closest in 2012, thanks to a boost from the Department of Housing and Urban Development, which awarded 14.65 percent of its contracts to women-owned businesses.
Even without sole source authority, the process of working with the federal government is a complex one, Lawrence says.
“There are so many rules and regulations they have to abide by, it creates a barrier for women and some minorities,” she said. After many attempts, she finally landed her first federal contract last year. “It was a learning curve, even with [free, SBA- sponsored] classes. If you’re not awarded a contract, follow up and find out why…. that helped me correct what I was doing.”
Despite the obstacles, women entrepreneurship will likely continue to grow, especially if proposed interventions come to pass. For starters, an amendment to grant sole source authority to the WOSB Procurement Program is neatly tucked into the National Defense Authorization Act of 2015, which has been passed in the House and is moving its way through the Senate.
The Senate committee also finds that the SBA Microloan and Intermediary Lending Programs are “well-suited to target women owned borrowers,” though they need to be modernized through Congressional action.
On the unconventional side, the explosion of crowdfunding – using social networks and websites to seek donations to raise capital for projects – has been particularly useful for women. Because it is such a new phenomenon, the law is still catching up. Most recently, the Jumpstart Our Business Startups (JOBS) Act of 2012 established some regulations.
The Committee report explains, “When fully implemented, the JOBS Act through crowdfunding has the potential to greatly expand the investor base and allow women-owned companies to appeal to a wider investor audience, such as other women investors.”
Data suggests that the Millennial generation, defined as those born between the mid 1980s and early 2000s, is particularly attuned to entrepreneurship. A Kaufman Foundation study found that 54 percent of young people are interested in starting a business or have done so already, and that the rate is “notably higher —10 to 11 percent” for young adults of color.
Lawrence advises aspiring entrepreneurs to become experts on the market they’re entering, make connections, and take advantage of resources such as a local SBA office, Women’s Business Center, or nonprofit/state-sponsored classes. She says learning how to properly present your business for federal contracts is a skill all its own.
“It takes a lot of research to figure out what’s available to you. The SBA has done a good job in the past with helping find out what’s available,” she says, adding that repeated engagement with these resources yields best results. “The information is out there, but you have to find it.”
This article originally published in the August 18, 2014 print edition of The Louisiana Weekly newspaper.