Gail Warrior, who started one of the largest women-owned and minority-owned construction companies in the United States, recalls her first experience applying for a commercial loan in 2000. She was managing director of the Warrior Group, based in Dallas, a modular construction company that had just won a government contract to build a barracks in Fort Bliss and needed to raise capital to complete the project. She went to her bank, where she had already been operating for two years and had several accounts: her professional account, her personal account and a joint account with her husband. Although she has a history with the bank and a contract in hand, she was turned down.
“They said they would do it under review if I was considering taking out a loan with my husband as a co-signer,” she recalls. She went to a few other banks and was also turned down.
Fortunately, she had met the founder of the Texas Women’s Venture Fund once and decided to reconnect. The moment was fortuitous. The fund, which invests in women entrepreneurs who have generated at least $ 2 million in income, is headed or majority owned by a woman, and she was looking for other prospects. They picked the Warrior’s project and gave him $ 4 million to fund it.
“I can’t tell you how many times I’ve heard, ‘Don’t take it personally,’” Warrior said. “How am I supposed not to take it personally if I know that if a guy comes in with the same deck he’s more likely to close the deal?” She said, noting that she made Warrior a multi-million dollar company with 50 employees.
The warrior is far from alone. While entrepreneurship in the United States as a whole is in decline, black women are starting businesses at the fastest pace of any racial group, according to a study by American Express. Since 2007, the the number of businesses owned by African-American women increased by 164%. Almost half of women-owned businesses in the United States, or 44 percent, are owned by minority women, according to census data and projections by research firm Womenable. This is 20% more than in 1997.
Yet despite the unrest, minority women are excluded from access to capital. According to Federal Reserve In the System’s 2016 Small Business Credit Survey, black women are more likely than their non-minority peers to identify access to credit as a challenge. They also said they were less likely to receive some or all of the funding they requested. Indeed, the Small Business Administration Office of Advocacy has found that women and minority business owners are denied loans and pay higher interest rates than their white counterparts, even after controlling for factors. such as credit rating.
In capital risk, men still get the lion’s share of funding, with just 2% of the capital going to U.S.-based founding teams, according to PitchBook. Of the 2%, women of color only get a fraction.
There are more and more efforts to correct this evil by various means. A slight increase in funds focused on women, including some for black women, is an encouraging sign. There is also growing resources to support black women entrepreneurs, such as Black Women Talk Tech, Black Girl Ventures, $ 100 million New Voices Fund, Twenty65, and $ 26 million Backstage Capital Fund.
“Most cities have a co-working space but don’t have an easy way to access capital. They may not have black and brown leaders working locally to get things done. , showing up and being in the room is a huge part of the job, ”said Shelly Bell, founder of Black Girl Ventures, an organization that provides education and counseling services that set a roadmap for growth and the success of minority and / or veteran women entrepreneurs Some of the difficulty black women face in accessing capital is seeping into island networks of banking and venture capital.
“There are banks that are discriminatory,” Bell admits, but a big part of the challenge is that many black women apply for loans without forming relationships. Minority women start out at a disadvantage in this regard. “It all depends on who you know. If your mom didn’t go to school, if your dad didn’t golf with a founder, or if your mom didn’t go to school with a member of the board of directors of a large educational institution, where do you find these connections? One of the things we hope to do is bring these people together in one space, ”she said.
Of course, bringing people together is easier said than done.
“Venture capital is done through small networks and gatekeepers,” said Dell Gines, senior community development advisor at the Federal Reserve Bank of Kansas City, who wrote a report on black women start-ups. as well as guides and an ebook on entrepreneurship and the economy. development. Those without access to these networks or gatekeepers are much less likely to make their case heard, let alone get money.
The world of venture capital and banking is insular and predominantly white and male. Because it is human nature to gravitate towards the familiar, this means that when it comes to investing, businesses aimed at women or minority communities are often not valued.
When Funlayo Alabi launched Shea Radiance, a natural skin and hair care brand 10 years ago, it saw a gap in the US market for natural, unrefined shea butter products. An immigrant from Africa, she saw with her own eyes how the unrefined shea butter her mother brought home worked on her son’s eczema. She started selling small lots of natural moisturizer mixed with essential oils at the local farmers market and saw strong demand.
Soon, she began to tap into her own retirement savings to start the business and import her product, and raised over $ 50,000 from friends and family to bring in a 20ft shipping container. unrefined shea butter, from eight village cooperatives in Nigeria. As her business grew, she knew she needed to raise more capital.
CEO Shea Radiance Funlayo Alabi
Shea Radiance was already present in some Whole Foods stores as well as in natural stores. She approached several local banks, bringing up sales and product projections, but none of the bankers, all white and male, seemed to understand the appeal of natural skincare products.
“The bankers didn’t understand the natives and didn’t fully understand how our supply worked. They thought there was a lot of risk there. I couldn’t get loans from traditional sources,” she said. declared.
The statistics correspond to Alabi’s experience. Black women business owners are much more likely to report that they have not received any of the funding requested, according to a study by the Federal Reserve Bank of Kansas City.
Part of the reason for these loan denials is a mismatch between what bankers or venture capitalists see as a vacuum in the market and the opportunities minority business owners see, Gines said. Entrepreneurs often start businesses based on a need they see in the marketplace in their communities.
“We are missing the boat by not supporting entrepreneurs who are already motivated,” said Gines. “Black and Latin women are setting up tons of businesses and showing motivation – probably far more than what would be willing and able to start high growth businesses with direct economic value” – but do not receive funding, a he declared.
To overcome this barrier of inconsistent perceptions, organizations like Black Girl Ventures are working to bring the two communities – minority investors and women entrepreneurs – together in constructive ways.
“Investors sometimes say they can’t find a black or brown business owner or black or brown women. I want to raise my hand to say I’m here to facilitate the conversation. I have a whole pool of people. “Women-owned businesses. I would love for the day when” I couldn’t find anyone “to go away,” she said.
Disclosure: NBCUniversal and Comcast Ventures are investors in Tassels.