Michelle Davidson opened Trinity Mortgage Solutions in 2005 on Colfax Street in Providence with four employees and the goal of serving minorities in the community. Today she has nine employees, has bought a building on Elmwood Avenue and has expanded into Massachusetts.
That would be difficult for anyone, but Davidson said that as a black woman, it was even more so.
“For me it was very intimidating,” she said. “Especially going into a financial field, because the numbers [of black business owners] get even smaller in this area.”
Though the data for Rhode Island is spotty at best, national figures from the U.S. Census Bureau show that black Americans not only own fewer businesses proportionately than whites, but the businesses they do own earn substantially lower revenue, on average.
As of 2002, there were 1.2 million black-owned businesses in the country, the Census figures show, with a combined $89 billion in revenue. That’s 5.3 percent of for-profit, privately owned U.S.-based businesses, less than half of African Americans’ share of the population (12.1 percent), and 1 percent of the gross receipts, or 18 cents per $1 earned by white-owned firms.
Rhode Island figures suggest a similar pattern, though they are too incomplete to be usable – figures for black women-owned businesses are excluded. Yet most people familiar with the local business community say large racial disparities do exist here.
Denise Barge, executive director of the Minority Investment Development Corporation, which helps finance small, disadvantaged businesses, said part of the problem is that black entrepreneurs often lack mentors.
“It hasn’t been a generational trend,” she said. “It’s been more of one where you pull yourself up by your bootstraps and you wouldn’t necessarily have support from a father or grandfather.”
That was certainly the case for Davidson.
“I graduated from Hope High School, which at the time was called the school for the hopeless,” she said. “I’m a first-generation business owner and a first-generation graduate of college. I grew up on the West End and hadn’t seen anyone prior in my family run a business. I haven’t really seen anyone be financially sound.”
She found support in the Urban League of Rhode Island. But Karriem Kanston, a member of the Rhode Island Young Professionals – a minority-focused networking group – and a small business development officer at Coastway Credit Union, said the available programs are not visible enough.
“I think there needs to be more outreach to the African-American community,” he said. “I think people in the country haven’t recognized the black holocaust. We’re still not far removed from the civil rights era, from people not being able to vote.”
Barge has another theory to explain why more successful black Americans don’t start businesses.
“What I think might have happened over the years are African-American businesses would tend to be service and retail businesses, but more people were pushed out into corporate [or] government jobs,” Barge said.
John Logan, a sociologist at Brown University, agreed.
“The main thing that’s striking about blacks is they do much better in the public sector,” he said. “They’re much more concentrated as workers and overrepresented in the public sector, and the payoff is much greater than for those owning their own businesses. So as a rational choice, someone might reasonably decide not to open their own business.”
Middle-class African Americans, he added, have found “they can get a return on their education in the public sector, and [even] many people with lower education know they get better benefits and more secure employment.”
This may explain some of the differences between black Americans and immigrants, who have relatively higher entrepreneurship rates, Logan said. Language barriers and often lower educational levels make it harder to pursue such paths to the middle class.
Black Americans who do open businesses, however, often face the same challenges as immigrants, experts say – lack of capital and limited market access.
“There are a lot of hurdles … especially for low-income people,” Kanston said. “If your credit is not right and you don’t own any property, it’s hard to start a business.”
According to the U.S. Census, only 48 percent of U.S. blacks owned their homes in 2005, compared with 76 percent of non-Hispanic whites.
“You need to have something to leverage to get an adequate level of capital,” said Charles Newton, administrator of the state Minority Business Enterprise Compliance Office.
Credit is also a problem.
“We’re judged by our credit more and more,” said Barge. “I think because there’s not a lot of information early on about credit, people have problems with it, and I think that happens more with African Americans. There’s a lot of education that needs to be done at a fundamental level.”
Gaining access to the market is also a challenge, said Rep. Joseph S. Almeida, D-Providence, because black entrepreneurs don’t have “the cultural advantages that mainstream multi-generational companies have,” and the connections to the “good old boy networks” that can help them secure public-sector contracts.
“Rhode Island’s growing, but they’re growing without us,” he said.
Rosalind Pennington, president of the National Black Business Council in Culver City, Calif., said the same problems exist in the private sector.
“Major corporations and businesses seem to shy away from us. They do business with other minorities rather than with African Americans,” she said.
Because of this, Pennington works to bring black business owners together.
“We need to partner amongst ourselves to go for the larger opportunities,” she said.
And while Pennington works on networking and local advocates work to bring attention to the resources available to black entrepreneurs, Davidson is encourages young people in her community to consider starting their own business.
“I make it my responsibility now to go out to high schools and speak to classes of students and go to churches and talk with youth groups,” she said. “Because it’s not just knowing there’s a program – it’s knowing someone just like them has made it. Hopefully I can serve as a poster child.”
