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African-American Small Business Owners Younger, Happier, and 65% More Likely to be Women

African-American small business (SMB) owners are happier, younger, and more female-led than the average of SMB owners surveyed. They’re also showing increased confidence in the state of small business moving into 2019, according to a survey from SMB financing company Guidant Financial and leading online credit marketplace LendingClub Corporation (NYSE: LC).

The 2019 Small Business Trends surveyed more than 2,700 current and aspiring owners nationwide. The 2019 Small Business Trends report gathers findings about the current state of African-American small business ownership in the United States.

Key findings include:

  •     Thirty-eight percent of African-American small business owners are women — a big distinction from the average small business owner, of whom only 23 percent are female.
  •     Fifty-six percent of African-American small business owners rated their happiness at nine or 10 on the rating scale (10 being the happiest), 6 percent more than the average small business owner.
  •     African-American small business owners had an increase in confidence in the state of small business with a 9 percent increase to 30 percent compared to last year’s survey results of 28 percent.
  •     Forty-five percent of African-American SMB owners are boomers, while the national average is 57 percent.
  •     Thirty-two percent of African-American small business owners are Gen X versus 25 percent of the overall SMB owners surveyed.
  •     African American small business owners are 23 percent millennial while the average is 18 percent.
  •     A desire to “pursue my own passion” was the primary reason African-American respondents went into business for themselves, at 28 percent, followed closely by “ready to be my own boss” (27 percent). Other top reasons to go into small business included “opportunity presented itself” (17 percent) and “dissatisfaction with corporate America” (11 percent).
  •     Forty-seven percent of African-American small business owners are running their businesses by themselves, compared to the 33 percent of average small business owners.
  •     With a 45 percent increase in industry share, African-American small business owners are opening more health, beauty, and fitness businesses than in the prior year. These categories surpassed last year’s most popular industry, business services for African-American small businesses.

Challenges
Like other SMB owners, lack of capital and cash flow is among the biggest challenge facing African-American business owners. Related to this challenge, studies show minority-owned businesses receive lower loan amounts than non-minority businesses. The 2019 Small Business Trends survey saw this demonstrated in that the majority of African-American small businesses were acquired for under $50,000 (58 percent), while the national average of businesses acquired under $50,000 is 45 percent.

Forty-seven percent are running their businesses by themselves, compared to 33 percent of average SMB owners. African-American businesses have fewer employees, with 38 percent having two to five employees and only 7 percent having six to 10 employees. Contrasting this is the average small business owner, with 41 percent employing two to five employees, and 12 percent employing six to 10 workers.

Financing Trends
More African-American small business owners leverage cash to fund their businesses than other small business owners, 41 percent versus 32 percent respectively.

Alternative forms of funding, such as Rollovers for Business Start-ups (ROBS), a form of financing that allows small businesses owners to tap into eligible retirement accounts to fund their businesses without tax penalties, grew by 21 percent in popularity year over year. Other forms of financing that increased in popularity included unsecured loans, lines of credit, and SBA loans. Meanwhile, equipment leasing and crowdfunding both saw decreases in use — currently only 3 percent of African-American small business owners use equipment leasing, and only 1 percent utilize crowdfunding.

“It’s exciting to see African-American business owners increasingly confident about the state of business in today’s current climate,” said David Nilssen, CEO of Guidant Financial. “It takes confidence to open and maintain a small business and having a positive outlook will inevitably lead to increased growth and opportunity.”

Accompanying Infographics can be found at HERE.

Methodology
Between November 6, 2018 and November 16, 2018, Guidant Financial and LendingClub conducted an email survey of more than 2,700 male and female small business owners and aspiring entrepreneurs from the continental U.S., Alaska, and Hawaii. Ages of respondents ranged from 18 to over 70.

About Guidant Financial
Headquartered in Bellevue, WA Guidant Financial helps business owners secure financing to start, buy or grow a business. An industry leader in business and franchise financing, Guidant works with new and existing entrepreneurs to identify, evaluate and deploy customized financing solutions. Their services include, but are not limited to, 401(k) business funding, SBA loans, unsecured credit, and portfolio loans. In total, Guidant has helped over 20,000 entrepreneurs in all 50 states to invest more than $4 billion in funds to start small businesses, resulting in more than 85,000 U.S. jobs created. Visit Guidant on the web at guidantfinancial.com.

About LendingClub
LendingClub was founded to transform the banking system to make credit more affordable and investing more rewarding. Today, LendingClub's online credit marketplace connects borrowers and investors to deliver more efficient and affordable access to credit. LendingClub's technology platform creates cost efficiencies, which are passed onto borrowers as savings in the form of lower rates and to investors in the form of risk-adjusted returns. LendingClub is based in San Francisco, California. Loans made by WebBank, member FDIC.

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