A new survey conducted by small business financing firm Guidant Financial revealed some interesting trends in black business ownership. According to Guidant Financial’s website, more than 2,600 business owners and aspiring entrepreneurs responded to the survey.
Among African American business owners who responded, over half (57%) said their businesses were profitable yet challenges as a black-owned business remained. As a group, they are also less confident in the political state of small business that other survey respondents.
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Why Black Americans Are Starting Businesses
Sixty-two percent of African Americans said their desire to pursue their passion motivated them to start a business. Another 53% said they were ready to be their own boss. Meanwhile, 30% said they launched a startup when the “opportunity presented itself” and 22% said they were dissatisfied with working in corporate America. Twelve percent said they launched a business after being laid off or outsourced.
The Challenges of Black Entrepreneurship
An overwhelming majority of black entrepreneurs surveyed, 80%, said lack of capital was the most challenging aspect of running a business. According to ProjectDiane, only 0.2% of all venture capital funding was allocated toward startups founded by black women in 2016, while just 34 black women business owners received more than a million dollars of funding in the last year.
As a result, many African Americans are forced to fund their own businesses. In fact, 70% of those surveyed financed their companies using cash, while 23% received funding from friends and family. Eleven percent said they tapped into their 401(k) plans to fund their businesses.
See an accompanying infographic about African American respondents below.
(Infographic: Guidant Financial)
—Editor’s Note: This article was updated on Aug. 23, 2018, to site Guidant Financial as the only survey conductor. An additional update was made Aug. 28, 2018, after Politifact reported that Guidant Financial could not corroborate its statement that black-owned businesses had a year-over-year increase of 400%.