The Gender Impact

The credit crunch is not new for Black women businessowners. ?When you are a Black person, you are used to dealing in crises,? says Phyllis Shearer Jones, president and chief executive officer of Elan International L.L.C., an international development and conference and event-management firm in suburban Washington, D.C. But Jones, who sits on the board of the National Small Business Association, says it is tougher now for entrepreneurs of all colors and genders globally, as well as in the U.S.

She says last year her business was helping to set up a community bank in Africa, but a key investor withdrew, blaming a drop in its portfolio. ?On the conference side of her business, she says big money sponsorships have dried up.

?Instead of one $10,000 sponsor, you have to get ten $1,000 sponsors. It is a whole different dynamic,? Jones says.

That changed dynamic also includes trying harder to keep costs down in part by negotiating better deals with hotels. Delores Sims, president of Black-owned Legacy Bank in Milwaukee, says many Black women entrepreneurs have come to her institution recently because they haven?t been able to get loans from their normal banks.

Over the years, she says, she has noticed Black women businessowners run out of money the quickest because they ask for the smallest amounts in the beginning.

To keep their businesses afloat, Sims says her bank has sometimes had to extend their loans, say from five years to 10 years.

With the jobless rate rising, the U.S. Small Business Administration is no-ticing more Black women are interested in creating their own firms. The number of Black women counseled and trained by the 113 grantees of the agency?s Office of Women?s Business Ownership rose to 39,000 in 2008 from 26,000 in 2007.

?We see this rise every time there is a recession,? says Chancey Lyford, the office?s acting deputy assistant administrator.

The number of businesses owned by Black women increased at substantially greater rate from 2002 to 2008 than African American male-owned firms (19 percent to 14 percent), according to the Center for Women?s Business Research.

However, as a whole, Black women entrepreneurs compare poorly against other minority women. While
the number of African-American women age 21 and over in the U.S. far exceeds the representation of adult Asian women, 14.1 million to 5.6 million respectively, the revenue of Asian American women-owned firms is quadruple that of African American women-owned businesses, $128 billion to $32 billion respectively.
At the same time, Asian American women-owned firms employed 898,240 workers, outpacing their Black women-owned counterparts, who have 281,055 employees.

Despite language barriers in many instances, businesses owned by Hispanic women (whose numbers are 13.4 million) brought in more than? double the amount of African American women-owned firms last year with $62 billion in revenues. The employment gap, however, was narrower with the number of workers in Hispanic women-owned businesses only 53 percent more than in African American women-controlled firms.
The gap can partially be explained by the greater discrimination Black women face when they attempt to get business loans, says Valerie Wilson, senior resident scholar at the National Urban League Policy Institute.
And since most small businesses are located near where an entrepreneur lives, Wilson says, Black women-owned businesses start out behind the eight ball frequently because of poverty in their neighborhoods.
?African-Americans have a persis-tent two-to-one unemployment gap compared to white Americans and that is not true with the other two groups,? she explained.

One of the reasons for the poorer showing of Black women entrepreneurs compared to Asian-American and Hispanic-American women may be suggested by findings in a report by the NUL last year that said Black women- owned businesses are concentrated in low skill, lower margin industries with particular concentrations in health, social services and retail.

?Black women-owned businesses need to participate in the higher skilled, higher technology subsegments of these industries in order to realize significant revenue streams and profit margins,? the report recommends.
The NUL report suggests one more profitable, higher revenue industry niche amenable to an increased Black women entrepreneur presence is wholesaling because business people generally find it easy to switch from retail to wholesale. Although the number of Black women-owned wholesalers is far less their retail operations, the wholesale revenues are greater, the study pointed out.

A hopeful development for would-be and current Black women entrepreneurs, said the group, is the emergence of not-for-profit microlenders who funnel business loans from the U.S. Small Business Administration of loans generally less than $35,000. The sums are small but often enough to get a noncapital intensive business off the ground.

However, one SBA microlender intermediary, the Community Business Partnership in Springfield, Va., said banks have become increasingly reluctant to make microloans to business despite the SBA guarantee. Kathy Wheeler, president of CBP, noted her group was only able to get one loan approved from July to December 2008, where 22 were granted in the same period a year earlier.

She added banks are stiffening their requirements for businesses in the SBA program. In the past, the loan applicant did not have to have a written business plan. ?Now they do along with being mandated to have higher credit scores and more business training,? Wheeler says.
Despite the greater need for loans to keep businesses running, she says loan applications from small entrepreneurs are dropping.

?They are looking at their personal finances and saying, ?How can I afford more debt??? she added.
While most economists aren?t predicting a recovery any time soon, Jones says there are opportunities to succeed. Her advice to becoming one of the winners is to follow the money. Despite the recession, Jones pointed out, large sums are being spent on health, education and infrastructure.