SALT LAKE CITY – For minorities in the state of Beehive who hope to become their own bosses and carve a niche in Utah’s burgeoning business landscape, the playing field is anything but level, according to a recent study.
This fear of not being fairly shaken up is well known by a Salt Lake City entrepreneur.
Thirteen years ago, Senegalese immigrant Ibou Fall decided to fulfill his dream of owning his own business and opened the Twisted Roots reggae store in downtown Salt Lake City. Rather than seek financing from a bank for his new business, he saved the money on his own.
He said that was the only way he believed there was for him, fearing he would be turned down for a loan because he was “black and foreign.”
“I knew what I wanted to do, work and save as much as possible each month and I built that capital slowly,” he explained. “When I was ready – and I wasn’t even ready – I went because if I had waited, I probably never would have been ready.”
He started with a small inventory and gradually transformed his retail store into a supplier of clothing for men, women and children, selling hats, bags, jewelry, flags, posters and other products aimed at aficionados. African reggae, rasta and hippies. Today, years later, he is a proud businessman who has carved out a unique place for himself in the local market.
As to why he did not apply for traditional funding for his startup idea, he said he was not convinced his application would be approved.
“I don’t think I tried hard and the reason is probably because I didn’t think I was going to get it,” Fall said.
“I could have gone to a bank with a business plan or these ideas and do a presentation and stuff and not get the amount I wanted even though my credit was good enough,” he said. “I could afford to buy my own house, so my credit was probably pretty good. But getting money for a business loan is quite difficult.
A report of Self Financial, based in Texas, examining minority-owned startups in the United States showed that lack of access to capital is one of the main obstacles they face. Another problem is their disproportionate representation in industries more prone to economic upheaval, such as closures in the food and hospitality industries caused by the pandemic.
For this reason, minorities are marginalized in the startup economy relative to their percentage of the overall population, according to the study. While African Americans make up 12% of the nation’s population, they make up just 3% of new minority business owners, according to the report. The study also ranked U.S. states based on the proportion of minority-run startups in the overall total, including the total number of minority-owned startups in each state, their number of employees, annual sales, and their share of the total statewide minority population.
For Utah, the results revealed that minorities make up 22.3% of the state’s total population, although just under 7% of startups in Utah are minority-owned. Nationally, the Beehive State came in with the 10th lowest percentage of minority-owned startups.
“The first structural barrier for future minority entrepreneurs is access to capital,” wrote report author Lauren Bringle, Certified Financial Advisor and Head of Content Marketing at Self Financial. “Minority households have lower levels of pre-existing wealth and savings to spend on a new business, while banks and other creditors are less likely to approve loans for black or Hispanic small business owners than for homeowners.” white companies. Without initial capital to invest in a growing business, minority entrepreneurs find it difficult to manage and scale their operations. “
These factors, and others, impact the number of minority businesses relative to their share of the national population, she said. For example, non-Hispanic whites, who make up about 60% of the U.S. population, run nearly 80% of startups nationwide. Hispanics of all races, on the other hand, make up 18% of the American population and only 7% of start-up entrepreneurs. For blacks, those numbers add up to 12% and 3%, respectively, according to the data.
The study indicated that minority businesses are also particularly affected by the COVID-19 pandemic because of the types of businesses they run. Research has shown that the industrial sectors with the highest concentration of minority business owners are food, accommodation and small retail, all of which were hit hard when parts of the country experienced shutdowns.
Despite all the challenges, there are currently nearly 170,000 minority-owned startups spread across the United States, according to the report, with more than 700,000 employees who generate nearly $ 100 billion in revenue per year. The numbers are likely to rise based on demographic trends as the country’s population continues to transform and expand along ethnic and racial lines, Bringle said.
Unsurprisingly, states with higher minority populations, including “majority-majority” California and Hawaii, also have the highest percentage of minority-owned startups, she said.
The study found that the minority population of the Salt Lake City metropolitan area represents 28.27% of the total population, but only 7.83% are minority-owned businesses. These companies employ just over 1,400 people and generate nearly $ 156 million in annual revenues. In comparison, just under 20% of American startups are minority-owned, while the national minority population is nearly 40%.
Local business leaders argue the minority business problem has been around for years but may have just been highlighted by the pandemic.
“Small businesses don’t thrive here as often as a minority business,” said James Jackson III, founder of the Utah Black Chamber. “In a darkroom, the biggest growth I’ve seen in startups has been over the past eight months with people (producing) masks and thinking about innovative ways to start their own businesses. because they are out of work, so they are trying to use their art, skills and abilities to start something over from scratch.
Nationally, the average black business has about 10 employees, he noted, and in Utah it’s about half, preventing them from taking advantage of the programs that other small businesses do. can use to stay afloat. He said it was never more evident than when the federal government adopted measures like the Paycheque Protection Program – or P3s – to help small businesses survive the pandemic.
“When you think of P3s, how those funds are allocated to the employee base, it can bring in a few thousand dollars, maybe,” he said. “But it doesn’t go very far to really support them because they don’t have 10, 15, 20 or 100 employees. They have two, three, maybe five employees, so you make a little bit of money but it doesn’t go very far.
He said developing partnerships with institutions that can help provide better access to capital can be one way to build resource bridges for minority businesses in Utah.
“Create awareness about the barriers that exist for small businesses – especially that of black and brown entrepreneurs, and then solutions to remove those barriers,” Jackson said. “We want to build this bridge of inclusion to bring resources to (minority) companies, to elevate them, to make them grow so that they can have more growth because we all know that diversity pays off. If we add more diverse businesses to our community, it also helps close the racial wealth gap. “
