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Minority Startups: A Measure of Progress

Minority business ownership is growing significantly faster than the national average, according to new data released by the Census Bureau.

While overall business ownership in the U.S. increased by 10% between 1997 and 2002 -- the period included in the Census Bureau's 2002 Survey of Business Owners released in late July -- the number of black-owned businesses jumped 45%, Hispanic-owned ones increased by 31%, and Asian-owned ones are up 24%. Businesses owned by women, regardless of race, grew 20%.

MORE LOANS, SMALLER AMOUNTS. "The small-business neighborhood is changing," says Hector Barreto, administrator of the Small Business Administration. "We already had a strong sense of this [growth] because we've seen an incredible growth in our loans to these communities."

The SBA guarantees loans to small-business owners under several programs, including its flagship 7(a) loan program. Loans to minorities overall have increased by 27%, compared with the first three quarters of last year, and lending to women have shown an increase of almost 50%.

While part of the lending increase has resulted from the SBA's recent practice of offering more loans in smaller amounts, Barreto says a variety of evidence points to minority business growth. "We work very closely with [minority] chambers of commerce, and they also believe things are going in a positive direction," Barreto says.

LAGGING REVENUES. He attributes the overall minority gains to increasing immigration and more government attention to small business, including contracting set-asides. "In 2003, the government purchased $65.5 billion from small business, which is more than 23% of everything the government bought," he points out. "Twenty billion of that went to small, disadvantaged, and minority-owned businesses. That's a huge infusion of capital and an all-time high."

Among the different minority groups, black business ownership increased most dramatically over the six-year period, up 45%, to 1.2 million businesses in 2002. Hispanic-owned businesses grew 31%, to 1.6 million, and Asian business ownership was up 24%, to 1.1 million in 2002.

Receipts for black-owned companies lagged considerably behind those reported for Hispanic- or Asian-owned companies, however. Black-owned businesses reported $92.7 billion in revenues in 2002, while Hispanic companies brought in $226.5 billion, and Asian-owned businesses had the highest reported receipts, at $343.3 billion.

ISSUE OF SURVIVAL. The discrepancy may stem from lower penetration by black businesses into various sectors of the economy. Barreto points out that blacks are more likely to open companies in the retail and service industries, rather than in manufacturing or high-tech sectors, where receipts tend to climb higher. "Still, it's very positive that we have so many new black-owned businesses," he says, noting that younger companies also take more time to generate substantial revenues.

But while minority business leaders have generally welcomed the news, they also point out that the statistics measure ownership rates, not long-term success rates -- an issue with which younger companies particularly struggle.

Sylvia Grier, president of the Carolinas Association of Black Women Entrepreneurs, based in Charlotte, N.C., says she's not surprised by the finding that black-owned companies earn less than their counterparts. "It's not that hard lots of times to start a business," she says. "What's hard is to make money at it and stay in business. Every person of color that I know is struggling. Eventually, some of them get discouraged and go back to working for someone else."

Grier, a demolition contractor who says she has a hard time getting information about bidding on both public and private jobs, believes that despite the overall growth in black business ownership across the country, economic racism still exists against blacks, especially in her region.

FEELING MORE WELCOME. And while blacks try to patronize black-owned businesses, Grier says, the price competition from large corporations such as Wal-Mart (WMT) has made that increasingly difficult, particularly in low-income communities.

Bob Snead, president and CEO of the El Paso Black Chamber of Commerce in Texas, agrees that "racism is still out there," but says it's more hidden and less blatant today. "It's not going to jump out at you, but as long as the world stands, there's always going to be a good-old-boy network that's based on color."

Snead says his group has grown from a handful of members since its founding in 1996 to about 400 members now. During that time, he says, he has seen increasing numbers of blacks become educated about business ownership and obtain startup financing. Black small-business owners are starting to feel more comfortable going to banks and other institutional sources for loans and often find they're welcomed rather than turned away, he says.

SPANISH OUTREACH. Still, Snead says he believes the black community is not receiving enough outreach from government agencies like the SBA. Helpful programs exist, he notes, but many struggling African-American entrepreneurs don't know about them. "I don't think [the agencies] are sensitive enough in that regard," he says.

In contrast, Patricia Chavez-Villanueva, originally from Mexico City, gives the SBA high marks for getting its message out to the Hispanic community, particularly in the Spanish language. Chavez-Villanueva and her husband, Carlos, run C&V International, a Monrovia (Calif.)-based outfit that does marketing and promotional consulting for Spanish-language companies in the U.S. and abroad. The Spanish-language media's growth in the U.S. has benefited her firm, which now has 10 employees.

She says government outreach to Hispanic business owners has improved dramatically over her seven years in business and that Web sites and brochures printed in Spanish have proved particularly helpful. "They have information on how different agencies can help you set up your business, and they can teach you how to do it in your own language," Chavez-Villanueva says. "It makes you feel like you're not alone."

With ranks growing at such a clip, minority entrepreneurs today are far from a marginal group.


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