Investing in Black-owned businesses has been a hot topic in recent years, and for good reason. Even though there has been significant growth in Black business ownership in the past decade, many owners continue to face challenges, primarily a disproportionate access to capital.1
The Covid-19 Pandemic Broadened the Disparity
Just as many Black-owned businesses began making strides toward success, the COVID-19 pandemic set them back again. Businesses universally suffered during the pandemic, but the number of Black-owned companies that decided to shutter their businesses nationally was one of the highest among different racial groups, at 41%. This certainly set back the growth of Black ownership and has made investing in Black-owned businesses more vital.
Why It is Important to Invest in Black-Owned Businesses
Investing in Black-owned businesses is crucial in helping Black entrepreneurs bounce back from the pandemic. It is also important for several other reasons, including closing the racial gap and growing the economy by creating more jobs and building communities.
It Helps Close the Racial Wealth Gap
While the wealth gap between races has been slowly closing, the median wealth for White/Anglo families is still 12 times higher than for Black families. This wide disparity is linked to historical discriminatory hiring practices and challenges faced by Black entrepreneurs when seeking funds to get a business venture off the ground. By investing in Black-owned businesses, you can help close this racial gap even more and allow Black business owners to grow their wealth as well.2
It Promotes Job Creation
When Black-owned business owners aren’t able to receive the capital they need to grow and expand their business adequately, many will likely continue to operate as sole proprietors or with a small number of employees. However, when you invest in Black-owned companies, it will increase the opportunity for them to hire more employees at a larger level, as well as pay fair wages and offer benefits that previously may have been unrealistic due to a lack of funds.2
It Helps the Local Economy
Small businesses are the lifeblood of local economies. They bring prosperity to the local population. Small businesses also tend to reinvest their profits in their community by purchasing their products and services locally and donating to local causes. They also tend to hire employees from the local area. Black-owned small businesses alone will recirculate 48% of their money locally. This means that when you invest in Black-owned small businesses, you will be improving their local community and increasing the opportunities for generations to come.2
It Promotes the Future
For a long time, for many in Black communities, business ownership seemed a remote dream due to societal challenges. Today, this issue is improving. By investing in Black-owned businesses, you can help create a foundation for future growth by creating mentors for younger generations of business owners. Today’s entrepreneurs have an opportunity to be looked up to by showing the next generation that business ownership is a dream that can come true.
Whether you are looking for new investment opportunities or seeking ways to diversify your portfolio, investing in Black-owned businesses can benefit not only the company you are investing in, but local communities and future generations of business leaders as well. A financial professional can assist you with these types of investment opportunities.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
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1Why It's Crucial To Support Black-Owned Businesses On Both Corporate, Consumer Levels, Forbes, https://www.forbes.com/sites/forbesfinancecouncil/2021/02/23/why-its-crucial-to-support-black-owned-businesses-on-both-corporate-consumer-levels/?sh=488892492ede
26 Reasons to Support Black-Owned Businesses, greenamerica.com, https://www.greenamerica.org/blog/6-reasons-support-black-owned-businesses