This paper is a collaboration between the Progressive Policy Institute (PPI) and Prosperity Now
By Myrto Karaflos, Prosperity Now
America’s entrepreneurial ethos is widely touted as a cornerstone of our culture and one of the ways to achieve the “American Dream.” It is true that small businesses play a critical role in the economy, as they account for 99% of American employers. Business ownership can also be a source of wealth creation for many, with self employed individuals being wealthier, on average, than those who work for an employer.
However, the path towards becoming an entrepreneur and growing a successful business is fraught with obstacles for large segments of the population. Entrepreneurs of color, particularly Black and Latine, face many barriers that result in them having smaller, less profitable businesses when compared to those owned by White entrepreneurs.
In recent years, the COVID-19 pandemic put a strain on many small businesses. It forced many of them to close in the early months of the crisis. It has also contributed to lingering societal and economic forces, such as inflation and the pivot to doing business online, that have changed the way small businesses operate. Black- and Latine owned businesses were particularly hard- hit. As government leaders focus on lessons learned from the pandemic, rising prices, and ways to strengthen U.S. economic resilience, they should seize the opportunity to invest in small business development that works to level the playing field for entrepreneurs of color.
This report will describe the pandemic’s effects on businesses of color and the broader, structural inequities that have limited these businesses’ growth long before the pandemic began. It will also explore how organizations in three cities across the country have used pandemic relief funds from the federal government to support entrepreneurs of color in their communities. Finally, the report will offer recommendations for how federal and local policymakers, as well as other entities in the small business ecosystem, can best target assistance and resources to business owners of color.
