Resource Category: Business Ownership
Equity gained from business holdings makes up a significant portion of the assets of the wealthiest U.S. families, but a variety of factors, such as racial disparities in access to capital, have led to lower rates of business ownership and business growth among Black and Latino business owners.
Why Racial Wealth Equity Matters
Starting and owning a business can be a valuable path for developing financial independence and, in the longer term, possibly accruing substantial wealth. In fact, business ownership makes up a larger share of net assets for higher-wealth families, suggesting that business investments are an especially valuable tool for vaulting up to the higher-levels of the wealth distribution.
When controlling for education and other socioeconomic factors, Black entrepreneurs, like White entrepreneurs, have greater upward wealth mobility than employed workers. Unfortunately, a range of systemic barriers make it harder for Black residents, and other residents of color, to start and grow a business.
Many new entrepreneurs, for instance, rely on financial support from family and friends to get a new idea off the ground, but because of the existing racial wealth divide, this creates a problematic cycle. White entrepreneurs are more likely to be successful in business in part because they have an easier time in the early stages raising start-up capital through these social connections.
Black business owners and other entrepreneurs of color face other capital access hurdles as well, such as far less access to venture capital (see The Color of the Capital Gap). For Black owners, if or when a business fails, it can propel them and their families on a downward wealth spiral, as the authors of Entrepreneurship and the Racial Wealth Gap: The Impact of Entrepreneurial Success and Failure on the Wealth Mobility of Black and White Families highlight.
