Starting a successful business is difficult for anyone - but it's even harder for minorities. They face discrimination from potential customers and lending institutions. There are also unique problems with setting up shop in neighborhoods with high minority populations. ideastream's Mike West has the report on the challenges of faced by African-American entrepreneurs.
About 500,000 people live in the city of Cleveland - nearly half are African American. Of that number, only around 3,500 are business owners. Community, business and academic leaders would like to see that number increase. Minority ownership means more jobs in areas of high unemployment and business investment in economically-challenged neighborhoods.
Bessie House-Soremekun has first hand knowledge of the issue. She's an associate professor at Kent State University. House-Soremekun wrote the recently published book Confronting the Odds: African American Entrepreneurship in Cleveland, Ohio.
Bessie House-Soremekun: Cleveland is doing fairly well in the area of entrepreneurship. We have an increasing number of African Americans who are looking at business ownership as a viable career path. But in comparison to other large metropolitan communities like Chicago, Illinois; Atlanta, Georgia; (and) Houston, Texas, we're really not in the top cadre of large urban centers in terms of the number of african-americans who owned their businesses.
While researching her book, House-Soremekun surveyed over 130 local black business owners. She says insurance and banking was their top concern. House-Soremekun claims banks and policy writers still use the illegal practice of red-lining applications for loans and coverage in mostly African-American neighborhoods. She says discrimination also forces African Americans to pay higher financing costs, and risk more of their own money.
Bessie House-Soremekun: In fact, most of the blacks in my study had to access their personal savings accounts, their credit cards, or to use their income tax returns funds in order to launch and expand the businesses in the early stages. Even entrepreneurs that were profitable still reported that they still have problems getting loans from the formal leading institutions and they are very profitable businesses so the racial barriers are still there.
This is Alexandria's on Main, a restaurant in the Flats district of Cleveland. It was recently opened by Jim Buchanan, who also owns a local recording studio and record company. He says he bucked the odds because most African Americans are brought up believing they can't own a businesses. Buchanan says it's a way of thinking that needs to be changed.
Jim Buchanan: The roadblocks and hurdles are, first of all, of gaining the idea, African Americans as a whole we haven't been taught how as youth to be entrepreneurs so most of the time it's a foreign idea that we have, we have to dig into it and research and find out how to be entrepreneurs so when we do we really have to want to do something in order to prevail it and continue to go on.
Buchanan says the shortage of African Americans business owners is obvious, and more customer loyalty would help.
Jim Buchanan: You drive through the African-American community and look at all the convenience stores and stuff and see how many African Americans own it. You'll see Arabs, you'll see every other nationality other than African Americans. Occasionally you'll see one but as a whole I'd say we probably own 5% of the convenience stores and gas stations in our community, and that's probably being generous.
So who is responsible for creating more African-American owned businesses? Buchanan says it's the majority population. But he doesn't trust government efforts and programs.
Jim Buchanan: So I think that the programs are developed without actual proper publicity about the programs to tell folk that look these are the programs available, you know government programs or whatever are available to assist. I think it's a token, saying OK, we've got to try to even the score we'll do it by doing these programs understanding that most folks won't know about them. You know the money won't be used.
The Small Business Administration is just one of many places entrepreneurs can go for help. Last year in the Cleveland district, the SBA helped secure loans totaling over $167 million. Director Gilbert Goldberg says the SBA backed 817 loans. Nearly 13% went to minorities, mostly African Americans.
Gilbert Goldberg: I think African Americans face the same challenges that other minorities and entrepreneurs that are in a group we would refer to as those that have been traditionally under served. They have been under served for a whole host of reasons.
The government offers special business programs to assist minorities. Goldberg says in his office, four staffers are on hand for that purpose. On the customer side there is also incentives. Many large corporations actively seek minority companies when they are purchasing goods and services.
Goldberg says the SBA does all it can help minorities, but they must first reach out, and then follow the guidelines.
Gilbert Goldberg: Everyone has to meet the same credit criteria, but from an outreach standpoint, what we try to do to this segment of the entrepreneurial community that has traditionally been under served is provide special seminars, special roundtables, special hand-holding, if you will, with the borrowers directly and with the banks to encourage them to go out and market and bring in, or make access available for capitol to the under served in these communities.
Mittie Olion Chandler is an associate professor at the Cleveland State University College of Urban Affairs. She has just completed a report that looks at issues that include African-American business ownership. She says assistance programs need to streamlined.
Mittie Olion Chandler: Sometimes when you have a number of different entities doing the same thing, there can be overlapping and resources not be used as effectively as they could be. What we would like to do is really get an assessment of what's going on in terms of what these different organizations are doing and to what extend they are achieving their goal and mission.
Besides giving black business owners financial help and training, Olion Chandler thinks African Americans need more examples and mentors. She says that means learning from other entrepreneurs even if they don't happen to be African American. In Cleveland, Mike West, 90.3.