Black Americans are underrepresented in entrepreneurship. The Black population in the U.S. accounted for 12.6% of the population in 2020, but the percentage of businesses with Black owners was only 2.3%, according to Brookings. Centuries of racist policies have contributed to a wealth gap that negatively affects would-be Black business owners. (These policies have had more damaging effects in certain areas. Here are the worst cities for Black Americans.)
The average net worth of white families is over seven times greater than the net worth of Black families, according to Brookings, and family wealth is one major determining factor in business ownership. While Black entrepreneurs start businesses with an average of $35,000, white entrepreneurs are able to start a business with an average of $107,000, the Stanford Institute for Economic Policy Research found in 2017.
The good news is that the rate of Black business ownership is on the rise. Although Black business owners were hit the hardest at the beginning of the pandemic, according to census data, there is a recovery. In the third quarter of 2021, there were 28% more Black-owned businesses than before the pandemic. (Here are 20 Black-owned wineries you should know.)
To determine the cities with the most Black-owned businesses, 24/7 Wall St. reviewed data on businesses with more than one employee from the U.S. Census Bureau’s 2021 Annual Business Survey. Metropolitan areas were ranked based on the percentage of employer companies owned by individuals who identify as Black or African American.
In all the cities on the list, the percentage of the Black population is higher than the national average – in some cases three or four times higher. Most are in the South. The Black population in cities including Albany, Georgia; Pine Bluff, Arkansas; Memphis, Tennessee; and Columbus, Georgia account for over 40% of the total population. While Georgia, Louisiana, and Virginia have three cities each on the list, Florida has five.
Despite the upward trend, Black entrepreneurs still face hurdles in accessing startup capital. They are denied loans at about twice the rate of white entrepreneurs, according to the federal reserve. If the percentage of Black-owned businesses were proportionate to the population, these establishments would create nearly 7 million more job opportunities and generate an additional $733 billion in revenue. (Here are America’s best companies to work for according to Black workers.)
Click here to see the cities with the most black-owned businesses.
Click here to read our detailed methodology.
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