There’s a change of ownership taking place when it comes to new business creation in the United States. Nationally, applications for new businesses swelled in from 2019 to 2022, according to a new report from Brookings. Black and Latino business ownership grew, while the share of businesses with white owners remained flat.
Black business owners went from making up only 5% of U.S. business-owning families in 2019 to 8% in 2022, according to the Brookings report.
While the Pittsburgh region kept pace with the national trend of new business creation — with a 37% increase in new business formation during the same time period — southwestern Pennsylvania lags when it comes to the diversity of entrepreneurs responsible for the surge.
For example, the Black business ownership rate was 2.3 businesses per 1,000 people in the seven-county Pittsburgh metro area, according to 2022 data from the U.S. Census Bureau’s Annual Business Survey. That’s below the national rate of 3.3 Black owned businesses per 1,000 people.
The authors of the Brookings report say it’s important to take note of the national trend taking place when it comes to the diversity of business ownership in the U.S., as the shift has the potential to squeeze long-standing wealth gaps.
“Business ownership is a substantial part of wealth for a lot of white households,” said Wendy Edelberg, director of the Hamilton Project at Brookings and co-author of the report. “The more we can see Black households and Latino households also own this kind of wealth, means that if bad things happen in the housing market, if bad things happen in the stock market, they still have this other form of wealth that can help them to buffer these shocks.”
And local stakeholders say they’d like to see a similar trend take hold in our region.
True opportunity
“I think the numbers are the numbers,” said Majestic Lane, chief equity officer at Allegheny Conference on Community Development. “But I do see some progress.”
One of these areas of progress Lane points to is the growth of micro businesses. These are businesses that have fewer than 10 employees, do most of their business online and are often run out of someone’s home.
“We’re seeing a rise in that segment,” said Barãta A. Bey, president of the African American Chamber of Commerce of Western Pennsylvania. “Surprisingly, that is being led by black women. And it’s growing. Now, when you’re thinking of businesses with a brick and mortar location — they’re not faring as well here in Pittsburgh.”
Small businesses looking to move into a physical location can get a boost from the Pittsburgh Downtown Partnership’s rent abatement program. It pays up to 50% of the monthly lease up to $2,000. Small businesses have to meet some criteria, which include being actively engaged in the negotiation of a lease.
Other local support comes from nonprofits such as Catapult of Greater Pittsburgh, which offer programs aimed at wealth building and business development. This includes a one-year program to help minority entrepreneurs start or grow a retail business. Ascender, a Pittsburgh-based business incubator and co-working space, recently offered small grants of up to $5,000 to help local Black and Latino-owned small businesses.
“It comes down to true opportunity,” Bey said. “Doing business with the larger companies that can provide those opportunities and those contracts and those partnerships to help these smaller businesses to scale.”
Capital challenge
One of the biggest barriers Pittsburgh’s Black entrepreneurs face is equitable access to money to fund and sustain their businesses.
“There’s no lack of interest of Black and brown people starting companies,” Lane said. “It’s that, historically, there has been a lack of access to capital.”
How banks have dealt with the Black community shapes the challenges Black entrepreneurs face when it comes to accessing commercial credit. “Institutions can look at Black-owned businesses differently,” Bey said. For example, lenders tend to grade them more unfavorably on certain criteria during the loan-underwriting process, he said.
Increasing access to capital for Black business owners could be a boon for the region’s growth. Bringing the ownership rate of Black businesses in line with the rest of the nation could result in 200 new businesses and employ an estimated 2,000 people in the region, according to an analysis of Census data by the Allegheny Conference. In addition, the hypothetical growth could boost the Gross Regional Product of the region by nearly $360 million, according to economic modeling done by the Conference.
“I think there’s an economic imperative when we look at a lot of the places across the country that are growing,” Lane said. “It’s also where you see a comparative large amount of Black and Latinx business ownership.”
