MBN USA Portal

MBN USA

April 14, 2023

Many Black-owned businesses still struggling post-pandemic

Before COVID-19, Black business growth was on the rise. But the pandemic hit African American-owned businesses the hardest. According to U. S. Black Chambers Inc., more than 40% of pandemic-induced business closures were from African American owners.

“I’ve long said [that] for there to be a great America, there must be a great Black America. In order for there to be a great Black America, we need great Black businesses. In order to have great Black businesses, we need great Black chambers of commerce and the impactful work the USBC does to support the growth of Black enterprises,” said Ron Busby Sr., president and CEO, U.S. Black Chambers Inc., in the organization’s “2022 BLACKprint,” a comprehensive outline of policies and priorities that support the Black business community.

Here, we catch up with USBC’s Busby; Charles O’Neal, president, Texas Association of African American Chambers of Commerce; and John F. Robinson, president and CEO, National Minority Business Council Inc., to discuss the state of Black-owned businesses in the supply chain, post-pandemic challenges and opportunities ahead.

What is your outlook for African American-owned businesses in the supply chain?

Busby: Integrating Black-owned businesses into the American supply chain as we seek to shift toward a “Buy American” strategy could not be more critical. Unfortunately, Black companies are completely underutilized in procurement and acquisition supply chains. While the current state of Black businesses involved in supply chains could be improved drastically, we are optimistic about the future for four reasons.

1. The Biden-Harris administration and agency officials are beginning to prioritize supplier diversity. The White House has underscored its commitment to equitable procurement efforts. President Biden has directed the federal government to increase the share of minority contracts by fiscal year 2025 to 15%. Currently, minority contractors represent 11% of the supplier base. The White House is looking to stakeholder groups like USBC close to these businesses and minority contractors to develop new policies to hold agencies accountable to their federal procurement goals. Through our advocacy efforts, USBC continues to develop close, working relationships with the White House Domestic Policy Council to inform high-level decisions on procurement and supply-chain diversity equity. Upcoming changes to supplier-diversity systems include new processes to track and benchmark new and existing entrants into the federal procurement marketplace, disaggregated data on contract awards to small businesses and improved access to data on past, present and upcoming contract opportunities.

2. The expiration of the African Growth and Opportunity Act or AGOA presents an opportunity for increased Black business participation in global and domestic supply chains. Through the AGOA reauthorization in Congress, we are working to ensure trade agreements contain equitable pathways for Black businesses in the global community and to capitalize on economic opportunity in one of the fastest-growing economies. We are urging the Export-Import Bank [of the United States] to provide technical assistance to Black business owners and are working to ensure the participation of Black American firms in African trading opportunities. Investing in American Black-owned businesses and including them in supply-chain diversification efforts fosters a win-win approach where we work to strengthen our national security and economic security.

3. The [U.S. Department of Commerce] Minority Business Development Agency or MBDA is operating under a larger budget than ever before — at $70 million for fiscal year 2023 and growing. Thanks to our advocacy effort in fiscal year 2024, MBDA offers excellent resources for Black firms to learn the logistics and sophisticated ins and outs of becoming a critical part of the American supply chain. Outside of MBDA — with which USBC maintains a close partnership — our programs are seeking to connect Black firms to opportunities through matchmaking services and entrepreneurial development programming to strengthen American supply chains.

4. Our ByBlack directory continues to grow. ByBlack is an extensive national Black business directory developed by U.S. Black Chambers with the support of American Express [Co.], the only national certification exclusively for Black-owned businesses. The directory is designed to provide Black entrepreneurs a way to reach new customers and get access to valuable business resources. To date, we have over 28,000 businesses onboarded to the directory. We have high hopes and big plans for the directory in the coming years, including working with federal agencies to onboard the certification as a federal certification. To learn more, visit byblack.us.

While there are many more [programs/resources] that are in the works, through [the aforementioned] efforts, we face a sense of optimism as we continue to hold public officials accountable for increasing the utilization of our firms in the years ahead.

O’Neal: I struggle to make distinctions in the outlook for Black-owned businesses, regardless of industry sector. Clearly, those few operating in the “supply chain” are subject to the same pressures that impact all businesses that rely on a “hiccup-free” transportation/logistics network. The volatility of outsourced manufacturing, warehousing and distribution consolidation, shrinking profit margins and delayed payments, I believe, will continue. Add to this [stress] the challenges that continue to bedevil Black-owned business — access to capital, access to opportunity, workforce development, etc., and you have a perfect recipe for difficult times ahead.

Robinson: The outlook for African American-owned businesses in the supply chain is challenging because of the greater competitive environment for minority/small business enterprises in the marketplace. Also, there is a challenge for minority businesses in the supply chain because of the limited capital base for minority businesses [which does not allow] them to be able to compete against nonminority small business enterprises.

What are the major challenges and opportunities ahead for African American-owned businesses?

Busby: I’ve long said that for there to be a great America, there must be a great Black America; and for us to have a great Black America, we must have equitable access and outcomes surrounding entrepreneurship and business opportunities for our communities.

Black businesses have historically had little access to capital and procurement opportunities in private and public markets. In fiscal year 2020, Black-owned small businesses only received 1.67% of available set-aside dollars according to recent disaggregated data. Federal programs — such as the 8(a) Business Development Program at the SBA [U.S. Small Business Administration] — are missing the mark when it comes to elevating Black firms.

The 8(a) program is cumbersome to navigate and currently prioritizes large, conglomerate-style firms that enjoy larger sole-source cap thresholds than other demographic groups and does not solve the crisis of underutilization among Black contractors. The prime-subprime structure of federal contracting relegates Black firms as perpetual subcontractors who, until recently, have lacked the ability to obtain past performance statements and compete for higher contracts. Without proper onboarding, technical assistance and support from experienced Black firms and minority chambers like USBC, Black firms may risk losing out on opportunities stemming from the Infrastructure Investment and Jobs Act (IIJA) passed last fall.

One of the major challenges we are seeking to address is to double the Black business procurement spend from the dismal level of 1.67% to 4% across the board; with the recent commitment from the SBA to release disaggregated data on small business contracts, we will be able to hold officials and agencies accountable to their goals.

There is also a prime opportunity for federal dollars to be spent with Black businesses thanks to IIJA, and one of USBC’s 2023 policy priorities is ensuring Black businesses are top of mind as procurement opportunities present themselves at the federal, state and local levels.

Access to capital is also a barrier we are working to address. According to the Federal Reserve, only 13% of Black-owned employer businesses receive the full amount of requested loans compared to 40% of white-owned businesses — even for Black-owned businesses with good credit scores. Among nonemployer firms, though Black business owners are most likely to apply for financing, they are least likely to receive it; 57% of Black owners are denied capital compared to 40% of white nonemployer business owners.

As a core pillar of our work, we look forward to engaging in extensive advocacy efforts this year which will be critical to moving the needle on these issues. Our policy priorities are outlined in our annual BLACKprint policy booklet, which outlines key steps the government can take to bolster the economic support for Black businesses. In the spirit of this new Congress, we look forward to releasing our 2023 BLACKprint later this month — so stay tuned.

O’Neal: One major challenge for Black-owned businesses is a reluctance — for many reasons — to pursue mergers/joint ventures and outright acquisitions of businesses in similar or closely related industries.

I think the other side of this coin is the major opportunity for Black-owned businesses, regardless of industry. Achieving competitive scale should be the goal of all businesses, and that competitive advantage is more easily attained by adopting the kinds of efficiencies achievable through well-thought-out merger and acquisition or M&A strategies.

I’d like to be hopeful that new funds raised by firms like Ariel [Investments LLC’s Ariel Alternatives LLC], Siebert Williams Shank & Co. [LLC], Lendistry [SBLC LLC] — and even a few Black-owned banks and [community development financial institutions] — mean that growth/expansion capital for this M&A activity will be more readily available.

Robinson: There are plenty of challenges for Black-owned businesses because of the growth of other minority businesses in the marketplace such as technology, professional services, manufacturing and international trade, to name a few.

[To overcome some of these challenges,] minority business firms should also consider growing their businesses through mergers and acquisitions, in and out of their industry group.

What’s your advice for African American-owned businesses still struggling to get back on their feet in this “new normal?”

Busby: Falling on hard times happens to every business there is, but when owners do not have a way to pick themselves up, the issue becomes less about the struggle and more about the lack of support. Not only are Black entrepreneurs the smallest demographic of people who identify as self-employed, but research from the SBA shows that those same Black businesses suffered the largest amount of lost earnings due to the COVID-19 pandemic. For business owners who continue to face this stark, unjust reality, I urge you not only to make your voice and circumstance known to your elected official but also to consider using USBC as a resource for policy solutions to help Black firms get back to business as usual.

I urge Black business owners to seek out:

• Their local Black chamber of commerce and the resources available to them.

• Professional technical guidance and assistance through both public and private partners such as SBA lending partners and resource partners and Minority Business Development Agency Business Centers.

• Lenders that are offering the billions of dollars going out to states right now through the [U.S. Department of the Treasury] State Small Business Credit Initiative.

If you don’t know where to start, come to organizations like ours to be connected to these resources. We do this work with you in mind and have had success connecting business owners with our corporate and public-sector partners who are excited to work with Black firms. Connecting with us ensures you have the most up-to-date information on the latest grants, procurement opportunities and development programs to help you transition into the new economy.

By staying resilient and staying together, we can realize the American dream for all Black America. To learn more about our work, advocacy efforts and upcoming opportunities, visit usblackchambers.org.

O’Neal: Don’t be afraid to ask for help! There are literally dozens of resource providers — chambers of commerce, community colleges, [U.S.] Small Business Administration [and its] Small Business Development Centers network, and both nonprofit and professional or for-profit providers of virtually every kind of consultative service and technical assistance needed to get a struggling business back on its feet.

The struggle is the time to do an honest assessment of your personal commitment to the life of a business owner, [along with] your business structure, internal controls, target market, supplier and financing relations and competitors. This assessment — if done honestly and earnestly — will provide solutions to the “new normal.”

Robinson: They should try and get back their old customers and try to re-engineer their companies for future growth and opportunities. They should also diversify their products and services for future growth opportunities in an expanded marketplace.

MBN USA is pleased to profile the following African American-owned businesses in the supply chain.

Farad Ali, president and CEO, Asociar LLC

Danielle Austen, CEO and managing partner, fluent360

Greg Bush Jr, president and CEO, KFA, Inc.

Augustus L. Collins, CEO, MINACT Inc.

Jackie Dyess, president, Inter-City Supply Co. Inc.

Gwendolyn Standberry Evans, owner, GSE

Ronald E. Hall Jr, president and CEO, Bridgewater Interiors LLC

Richard C. Holland, president, Holland Advisors LLC

Lorron James, CEO, James Group International Inc.

Fred B. Moses, vice president, operations, TelecomElectric Supply Co.

Terri Quinton, owner, Q2 Marketing Group