Minority Women Entrepreneurs Are Leading The Way For Small Business Growth

The surging growth of minority women-owned businesses in the last 15 years tells a mixed story about the American workforce.

Minority women-owned firms grew 156 percent from 1997 to 2013 and now account for one in three women-owned firms in the U.S., according to a 2013 report by American Express on the State of Women-Owned Businesses. In contrast, non-minority women-owned firms grew 32 percent during the same period.

A Two-Sided Coin
The growth in business ownership among minority women is a continuing trend, even if it comes from a smaller base, according to the report. Yet there’s a duality in the increase of minority women who are choosing entrepreneurship, says Dr. Sharon Freeman, president of the All American Small Business Exporters Association (AASBEA).

“There are two sides of the coin,” Freeman said. “On the positive side there are fewer barriers to being able to start a business,” she said. “On the other side, there are fewer employment opportunities, which necessitates going into business.”

Education and Networking Drive Growth
There’s a strong match between the educational tracks of minority women and the business sectors they choose, such as health care and social services, Freeman points out. In addition, most minority women-owned firms have just one to two employees, according to the report. “What you’re really looking at here is essentially self-employment,” Freeman says.

For minority women-owned firms that aren’t owned by first-generation Americans, networking may also drive business growth, says Freeman. Business owners with strong connections to their home countries can more easily export and import goods and services, she says.

Networking also improves access to capital among immigrant business owners, who create informal lending networks that can accelerate and propel the growth of their firms, Freeman adds.

Collateral Knowledge
While access to capital is increasing, there’s still a natural barrier for many minority women business owners imposed by a lack of collateral, Freeman says. “Even when a loan is backed and guaranteed by the Small Business Administration (SBA), you still have to have enough collateral so the bank is willing to take the risk on you,” she says.

One option for increasing access to capital may be to create solutions that collateralize business experience and knowledge as a soft asset that could add weight to hard assets like cash or one’s home, she says. For instance, if a person has a number of successful years in business, maybe there is a way to add weight for that actual experience to a loan application, she says.

Specialization Is Key
To grow their businesses to the next level, minority women business owners require the specialized knowledge that comes from the success stories of other entrepreneurs, Freeman says.

Entrepreneurs need knowledge that’s directly related to both their business types and their geographic regions, says Freeman. “How you make a beauty salon succeed on Chestnut Street in Philadelphia is different from how you make it succeed downtown in Washington, D.C.,” she said. “It’s another level of knowledge that’s not as easy to access.”

To help business owners find that specialized knowledge, Freeman writes a series of books to share gems of wisdom from different industries that are offered by the AASBEA. She also recommends the websites of the Minority Business Development Agency (MBDA), the SBA, and SCORE. But the best knowledge comes from the lessons learned by other entrepreneurs, Freeman says. “The secrets to success are not general, they’re specific,” she said.

Lisa Wirthman writes about business, sustainability, public policy, and women’s issues. Her work has been published in The Atlantic.com, USA Today, U.S. News & World Report, Fast Company, Investor’s Business Daily, the Denver Post and the Denver Business Journal.

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