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The Worst States for Minority Business Owners

Tucson, Arizona

Photograph by David Sucsy/Getty Images

Tucson, Arizona

Not all states are created equal when it comes to providing opportunity to minority entrepreneurs. In Florida, there’s one minority-owned business for every 11 minority residents, the highest rate of minority entrepreneurship in the country. Iowa’s ratio, at one business for every 43 residents, is the nation’s lowest.

Those numbers are based a report published by the Small Business Administration’s Office of Advocacy that estimated (PDF) the number of minority-owned businesses in all 50 states, plus the District of Columbia, in 2011. To put those numbers in perspective, Bloomberg Businessweek compared the SBA data to the number of minority residents in each state, as reported by the 2010 Census (PDF).

One thing that stands out in the chart below is that states with large minority populations tend to have higher rates of minority entrepreneurship, and vice-versa. Arizona is one outlier. It had the tenth-highest minority population in 2010, but just one minority business owner for every 31 minority residents, placing it 41st among the 50 states and District of Columbia. Vermont, with few minority residents but a relatively high rate of minority entrepreneurship, stands out at the other end.

There are sure to be nuances lost in the data. For instance, the mix of ethnicities that make up each state’s minority population might influence the business ownership rate. The state’s overall economy might, too.

On the other hand, states set policies, such as government contracting programs or education initiatives, that can promote minority entrepreneurship. Bank discrimination against minority business owners who want commercial loans is an additional factor that may make some states worse for minority entrepreneurs.

The data should also prove interesting to new Small Business Administration boss Maria Contreras-Sweet, a Mexican immigrant who founded a bank that specializes in lending to Hispanic-owned businesses. Contreras-Sweet has broadcast her desire to build a more inclusive agency. Paying attention to states that have been more—or less—successful at supporting minority entrepreneurs may be one place to start.

Clark is a reporter for Bloomberg Businessweek.

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