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Closing the Wealth Gap for Minority Business Owners

Closing the Wealth Gap for Minority Business Owners

February 09, 2021

Minority-business owners exist in every corner of the U.S., with new ones launching all the time. What business qualify as minority-owned? A private business must be at least 51 percent owned by members of a minority group to qualify. For public companies, a business is minority-owned if at least 51 percent of shareholders are minorities. Recent data published by the U.S. Small Business Administration revealed that nearly 30 percent of all U.S. businesses were minority-owned.1

A mainstay of the U.S. economy, minority-owned businesses bring significant benefits to local areas:

  • Innovative products and services that might not otherwise be available
  • Economic uplift to local
  • Job creation
  • Opportunities to reduce unemployment and lift people out of poverty

Minority-owned businesses create jobs and wealth and invest in their communities, which can be a great way to help close the wealth gap. Historical discrimination against certain minority groups created some challenges. Learning about the common financial barriers and ways to create sustainable solutions to overcoming them is an important step forward.


Did you know that more than 50 percent of the two million new businesses started in the U.S. over the last decade were minority-owned enterprises. Despite the tremendous growth in the number of companies, the average gross receipts for minority-owned firms dropped by 16 percent in the same period.2

A primary challenge for minority business owners is insufficient working capital to keep their business doors open long-term. The US Department of Commerce’s Minority Business Development Agency notes3 several factors that can diminish working capital available to minority businesses:

  • Greater experience of business loan declines – Among smaller firms with gross receipts below $500,000, 42 percent of minority-owned firms experience loan denials, while 16 percent of non-minority firms had loans denied Thirty-three percent (33%) of smaller minority-owned firms were also more likely to avoid applying for loans out of a fear of rejection, while 12 percent of non-minority had concerns about loan denials
  • Approval for smaller loan amounts – The average loan received by a minority-owned firm was $149,000, with the average non-minority firm’s loan amount at $310,000
  • Less collateral to secure business loans – Also, minority business owners may have less personal wealth, limited collateral and lower credit scores. All of those factors can make it harder to secure bank funding
  • Fear of rejection– Thirty-three percent (33%) of smaller minority-owned firms were also more likely to avoid applying for loans out of a fear of rejection, while 12 percent of non-minority had concerns about loan denials
  • Lack of Social Capitallack of critical relationships/network to grow their business. Some minority business owners may not have much management or business development experience and need mentors to guide them.

Building a network of trusted professionals is critical to running a successful company.


A financial professional can be an ally and valuable resources in helping minority business owners overcome the challenges they face. They can provide entrepreneurs insights on how to separate personal and business banking accounts, grant programs, government contracting programs that set aside contract awards for minority-owned enterprises and alternative funding options that can provide capital. Funding sources like these can fuel business growth and increase innovation.

In addition, since financial professionals typically have strong networks, they can introduce minority business owners to other small businesses. This networking can help minority business owners find mentors, suppliers, colleagues, and other sources of social support.

Financial services professionals can also help develop a business plan, a must for every company. A robust business plan includes a precise analysis of the market conditions, competition, product, service differentiators and financial outlook. If owners need to borrow money or seek investments, a business plan can explain how the funds will be used and what returns the investment will gain.

By working with a financial professional, minorities can help safeguard their business and personal interests. Financial professionals can provide guidance on legacy planning or tools to protect critical business personnel, such as life and disability insurance. Business owners can also plan for their own retirement and strategize how to hand off the business to the next generation or new owners. The key takeaway here is that minority business owners should not only work with banking or financial professionals to complete transactional events but should collaborate with them to form deeper relationships.

Minority business owners can seek guidance from empathetic and knowledgeable financial professionals. Financial professionals should take time to get to know each client as a person and welcome opportunities to work with individuals from diverse backgrounds. Building a relationship with a financial professional can be a critical step towards business success for every minority entrepreneur. Supporting minority business owners is an essential step to close the wealth gap.

Brought to you by The Guardian Network © 2021. The Guardian Life Insurance Company of America®, New York, NY. 

2020-113555 Exp. 12/2022