Starting a Business is Hard, Discrimination Makes It Harder

My parents came to the United States from India in 1971 to chase their “American Dream.” They bought a small community grocery, liquor store, and deli called Renno’s Quality Food Market in Shady Side, Maryland.

My parents became entrepreneurs out of necessity. They hoped it would create a path towards wealth and security.

Forty-six years later, they’re still on their feet every day, from 8 am to 10 pm, ordering products, stocking shelves, and recommending the best local wines. For them, their success in business is about building and serving their community.

It sounds like a familiar story. But the truth is, they’re part of the minority who beat the odds. According to Fundera, 20 percent of small businesses fail in their first year, 30 percent fail by their second, and 50 percent fail after five years.

Owning a business is unpredictable and difficult. I know firsthand that the idealistic view of entrepreneurship is not the reality most of us experience.

In 2013, my husband and I quit our jobs to open a spice shop at Union Market in Washington, D.C. We hustled for six years to grow a business that had two locations and five employees.

We had a product people wanted. We had a niche in our community. We were industry experts — chefs and bartenders from D.C.’s hottest restaurants hunted us down for obscure spices.

Nevertheless, we struggled.

We struggled to build a reliable team of employees. We struggled, as partners and new parents to twin boys, to balance work and family. We struggled with the bureaucracy we needed to trudge through to grow our business.

And we struggled because we ran out of money.

By 2019, we had to close the shop. The pieces just didn’t come together in the dreamy way entrepreneurs are told they can. For us, entrepreneurship wasn’t a pathway to wealth. It was a pathway to debt.

Entrepreneurship is capital-intensive, which makes it extra challenging for those with little access to capital. Insurance, licenses, inventory, and equipment require big investments long before a business opens its doors.

For Americans of color, the odds are especially steep thanks to our country’s stark racial wealth divides. Historically, discriminatory lending practices have prevented people of color from using traditional banks and lending institutions for obtaining capital. Even now, we have to meet higher income and collateral requirements.

We self-funded our business during its first two years. When we looked to expand, we reached out to local micro-lenders, but their loan rates turned out to be even higher than traditional banks. Ultimately, we secured a loan and credit card from a local bank to finance our expansion.

Because we had a proven track record, we had less trouble than others. Still, a credit card is a far thing from venture capital.

The National Community Reinvestment Coalition finds that small businesses owned by people of color have to rely far more on bank loans or business credit cards, rather than venture capital. That means higher interest rates, further raising the cost for the already economically insecure.

Entrepreneurial support networks built specifically for people of color are scarce, or else impose high barriers to entry. Members of the Entrepreneurs’ Organization, for example, “must be the owner, founder, or majority stakeholder of a business earning a minimum of $1 million in revenue.”

I want to see networks of entrepreneurs built by people of color, for people of color, with lower economic barriers to entry. I want to see more equitable resources offered for those between “just starting” and those with $1 million per year revenues. And I want to see more accessible financial planning and business education resources.

My tenacious parents have run their own business for over 46 years, despite the odds. They influenced me to create something of my own. Though it didn’t work out the way I envisioned, I can still work to put the resources in place for my children to succeed.

Monica Grover works on race, wealth, and community at the National Community Reinvestment Coalition.

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