| In Capitalist America, owning a business is the main | | | | capital were twice as likely to prosper, but only 1.7 |
| ingredient in the recipe for creating wealth. Although | | | | percent of black-owned businesses start out with |
| the number of self-employed Black Americans | | | | more than $100,000, compared with 4.9 percent of |
| doubled from 1984 to 2003, the Black American | | | | white-owned firms, said Fairlie. Furthermore, only 6.5 |
| self-employment rate is less than half the national | | | | percent of black-owned businesses start a business |
| average and still lags behind Latino, Asian and White | | | | with more than $25,000 in capital, compared with 11.1 |
| Americans. | | | | percent of white-owned firms and 12 percent of |
| According to the Small Business Administration, only | | | | business owned by Asian Americans. |
| 4.5 percent of blacks own their own business, | | | | Why the large differences in start-up capital? Not |
| compared with 7 percent of Latinos and 11 percent of | | | | surprisingly: Wealth! The net worth of blacks and |
| white and Asian Americans. Black-owned businesses | | | | whites accounts for the disparity in startup capital, said |
| generate dramatically lower annual sales than firms | | | | Fairlie. Defined as total assets, including home equity, |
| owned by white and Asian Americans, and they are | | | | automobiles, and savings, net worth for average Black |
| more likely to fail. | | | | Americans is about $6,000; Latino net worth averages |
| For years, University of California Santa Cruz (UC | | | | $7,000; and White and Asian Americans net worth is |
| Santa Cruz) Economist Robert Fairlie, has analyzed | | | | about $70,000. |
| data to understand these disparities and along with | | | | "Wealth inequality leads to these low levels of capital, |
| Alicia Robb of the Foundation for Sustainable | | | | which is a huge factor in determining the outcome of a |
| Development, has uncovered the main factors that | | | | business," said Fairlie, adding that, "Economists tend to |
| account for the lack of black owned businesses | | | | focus on wage and income inequality, but there really |
| compared to other races:o Insufficient amounts of | | | | needs to be more attention paid to wealth inequality in |
| startup capitalo Lack of self-employed work | | | | this country." |
| experienceo Lack of educational attainment | | | | The alternative source for start-up capital are Bank |
| "Half of all Asian Americans in the labor market have | | | | and Government (SBA) loans. Not surprisingly, Asian |
| a college education or higher," said Fairlie, emphasizing | | | | Americans have been the leaders in snagging SBA |
| the importance of education. | | | | business loans. Over the past ten years, Asians |
| "Business ownership is an alternative to unemployment | | | | obtained 12.2% of the $85 billion in loans guaranteed by |
| and discrimination in the labor market, and political | | | | the SBA, while Latinos received 5.6% and Blacks 2.8%. |
| influence comes with success in small business," he | | | | The USA Today also reported earlier this year how |
| said. "Historically in this country, we've seen rapid | | | | self-employed Asian Americans assist each other in |
| growth of business ownership among immigrants, | | | | business with alternative financing: |
| including Chinese, Japanese, Jews, Italians, Greeks, and, | | | | "Many Asian immigrants finance start-ups through |
| most recently, Koreans." | | | | informal loan associations. How they work: Twelve |
| Yet business ownership rates have been stagnant | | | | established Asian U.S. business owners will contribute |
| among Black Americans, said Fairlie, who presented his | | | | $1,000 each to a fund. That $12,000 is loaned to a new |
| research during a conference titled "Race, Families, | | | | immigrant entrepreneur. Loans are often interest-free, |
| and Business Success: A Comparison of African | | | | and agreements are sealed with a handshake," says |
| American-, Asian- and White-Owned Businesses." His | | | | Greg Fairchild, a professor at the University of Virginia. |
| presentation was sponsored by the UCSC Equal | | | | "It's a new version of what people have negatively |
| Employment Opportunity/Affirmative Action Office as | | | | called the good old boys' network," he says." |
| part of its diversity lecture series. | | | | These types of business associations are dated back |
| In his analysis, Black-owned businesses average annual | | | | to the early 20th century in the United States when |
| sales of about $60,000, compared with $167,000 for | | | | Asians were the primary foreign immigrant group. |
| Latino-owned businesses, $219,000 for white-owned | | | | Unfortunately, there are no direct equivalents in other |
| businesses, and $245,000 for Asian-owned | | | | minority communities. Harry Alford, president of the |
| businesses. | | | | National Black Chamber of Commerce, hopes one day |
| Only 14 percent of black-owned businesses generated | | | | there will be. Asians don't form loan pools "because |
| annual profits of $10,000 or more, compared with 30 | | | | they love each other," he says. "They see it as a |
| percent of white-owned businesses. Business failure | | | | necessity for business growth. We African-Americans |
| rates during the first four years are 27 percent for | | | | have a natural dependency on waiting for the |
| black-owned businesses compared with 22.5 percent | | | | government to do something." |
| for white-owned businesses. | | | | After reflecting on their discoveries, Fairlie and Robb |
| Sufficient startup capital, prior work experience in a | | | | point out several issues for government review, |
| family-owned business, and education emerged as the | | | | including improving bank lending laws to further protect |
| biggest differences in the success and survival of | | | | Black Americans from financial discrimination, |
| black, white and Asian-owned businesses. Having | | | | addressing wealth inequality, and developing internships |
| sufficient start-up capital accounted for 43 percent, | | | | that would help narrow the gap for the lack of work |
| self-employed work experience - 11 percent, and | | | | experience in family-owned businesses available to |
| educational level about 6 percent of the difference in | | | | Black Americans. |
| business ownership success. | | | | Create Wealth, Enjoy Life! |
| Businesses launched with $100,000 or more of startup | | | | |