In a 2008 study sponsored by Radio One, Black America Today, the majority of participants between the ages of 18 and 30 said they wanted to be entrepreneurs.
"The hip-hop generation believes in education, but not … that you need a good education in order to get a good job," Cathy Hughes, founder of Radio One, said at a recent White House reporters' roundtable. "They want a good education in order to work for themselves and to start their own businesses."
Hughes, who was tapped last year to chair the U.S. Small Business Administration's newly created Council on Underserved Communities, says that the latest initiatives from the agency are designed to help burgeoning minority entrepreneurs. The 20-member advisory council, which represents professionals from various backgrounds, including banking experts and economists, will provide recommendations on how the SBA can strengthen businesses in underserved communities, as well as communicate directly with aspiring and working business owners around the country.
The added attention for "underserved" small-business owners — which the SBA defines as people of color but also women, veterans, rural dwellers and the young — comes at a critical time. According to a 2011 U.S. Census Bureau report, from 2002 to 2007, black-owned businesses grew at a rate of 60.6 percent — more than three times the national average.
Despite this growth, however, African-American business owners still have greater challenges accessing capital. A 2010 study by the U.S. Department of Commerce's Minority Business Development Agency found that black-owned businesses are denied loans 27.1 percent more frequently than white-owned companies. And despite getting bailed out after the economic downturn, banks these days are slow to give loans to anybody.
Marie Johns, SBA deputy administrator, contends that one reason African Americans are passed over by banks is that they're more likely to be small-business owners. "One of the things we were hearing, in our constant efforts to hear from stakeholders, is that as the banks were beginning to lend again, they were more interested in large-dollar loans in the $1 [million] to $5 million range," she said at the White House roundtable. "They really had not paid much attention to small-dollar size loans, which are defined as $250,000 or less."
To try and get around this stalemate, last December the SBA announced two new loan initiatives. The agency's Community Advantage program established lending not with big banks but through nonprofit micro-lending intermediaries and Community Development Financial Institutions — local banks and credit unions that specifically serve businesses and individuals in low-income communities. The Small Loan Advantage program encouraged existing SBA lenders — 630 financial institutions across the country — to make the smaller loans that are needed in the early stages of growing a business.
Arguing that many aspiring entrepreneurs also don't have the know-how to successfully start a company, Hughes stressed that the SBA is more than just a loan agency; it also offers counseling and technical assistance. "It's one thing to want to go into business, but that doesn't mean that you know how to run a business," Hughes said. "So often, there are services and programs available at the SBA that the individuals don't even know exist."
Sofia Farah, who operates Camp Creek, an Atlanta retail pharmacy that officially opens its doors this weekend, took advantage of several SBA services. "I'd been working in retail for about eight years and wanted to finally go out on my own," she told The Root.
Farah, 36 and originally from Somalia, wasn't sure what to expect when she and her husband visited their local SBA office last December, having watched a couple of friends apply for loans, only to be denied. She happened to go on the same day that the Small Loan Advantage program rolled out.
"We were approved a couple of months later, and I think it was because of the new Advantage program," she said, adding that getting an $82,000 loan for pharmacy drugs, equipment and payroll was an involved process. "There were a lot of regulations and requirements that we had to meet, and they explained things to us as we went along. It helped us to be more detailed and thorough."
While Farah's loan approval went surprisingly smoothly, Hughes, who started Radio One in 1979 with the help of a SBA loan, knows that many business owners don't fare as well. She says she looks forward to having members of the Council on Underserved Communities speak with entrepreneurs at a series of town halls, which kick off in Washington, D.C., this July. She's optimistic that, once the council is better informed about their struggles, the council will be poised to help eliminate some of the barriers.
"The council provides the opportunity for individuals to have their voices heard," she said. "So often you hear complaints, but [now there's] an organization that's going to take your position and present it to those who can make a difference and create a change for you."
Cynthia Gordy is The Root's Washington reporter.