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While multiple reports have shown rising interest in financing Black-owned small businesses, a new study shows an underlying problem still remains. According to the “State of Minority Business, March 2022” report by Creative Investment Research, there has been less understanding of the core issues small Black-owned firms face in gaining funding to start or grow enterprises.

The analysis pinpoints why Black-owned firms continue to experience under-performance in accessing capital across the nation’s financial services-industry.

William Michael Cunningham, an economist and owner of Creative Investment Research in Washington, D.C., says those factors include elevated discouragement when applying for financing, low-profit margin industries, and a reported undercount by the U.S. Census Bureau of the number of Black owned businesses. He says potential discrepancy can lead to less funding from federal, state, and local agencies to support to those ventures.

Cunningham swears the lack of financing cuts across funding sources including banks, credit unions, venture capital firms, and fintech businesses. The research includes data on exit rates by year and race, the number times black firms re-opened, and the type of financing used.

“We were shocked by the layers of racism, discrimination, and anti-Black behavior on the part of financial institutions and how that conspired to lower Black business activity,” he says. Read more.