The untapped potential of Black entrepreneurs in Canada

Source: Statistics Canada, Black Business Owners in Canada, February 22, 2023

Black entrepreneurs operate in all industries, with the most significant being professional, scientific and technical services (20.6%), arts, entertainment and recreation (11.5%), retail trade (8.0%), health care and social assistance (7.7%) and finance and insurance (6.3%).

Black-owned businesses play a vital role in building resilient communities. The BEKH has found that while the general public primarily makes up the market base of Black businesses (68%), Black communities constitute an average of 27% of customers.  They often serve their communities by providing products and services that cater to specific cultural preferences and needs. The success of Black-owned businesses can also inspire others in the community, especially the younger generation, fostering a culture of entrepreneurship.

According to QuickBooks, nearly seven out of ten Black-owned small businesses say they are the only one or one of the few businesses in their city or town offering their product or services. Doing so, they help preserve and celebrate cultural diversity, contribute to community identity and strengthen social cohesion. They also contribute to the local economy, support local initiatives and often lead social change efforts. More than eight in ten (84%) Black entrepreneurs report they’re the first in their immediate or extended family to own a business—a rate of 75% compared to their non-Black peers. Fortunately, community support is strong: 95% of Black business owners have previously supported another Black-owned business.

Black entrepreneurs face challenges of their own

Because they own newer firms and are more likely to be immigrants, the financial situation of Black entrepreneurs is often more fragile, making them more vulnerable to economic shocks. Having no past credit history also limits their access to financing. Networks and support are therefore critical to the success of Black entrepreneurs. In fact, a significant portion of Black entrepreneurs (45%) consider that Black-led organizations have been either essential or very important to their business, according to Abacus Data.

• Racial discrimination is still a reality

Black entrepreneurs also face the burden of racial discrimination. Nearly three-quarters (73%) have turned away a customer due to racially charged statements in the last year, and 72% say the fear of racial stereotypes almost stopped them from starting their business. This is a significant hurdle to overcome.

• Access to financing can be difficult

When asked about their business challenges, access to capital is one of the top factors cited by Black entrepreneurs. The most significant obstacle reported when starting out in the business was the unavailability and high cost of loans or credit, which the BEKH found affected 46.8% of respondents. Most Black entrepreneurs (83%) have used personal financing to start their business, compared to 76% for all SMEs, and three-quarters of them say it would be difficult to find $10,000 to support their business.  Black entrepreneurs are less likely to say that their business has the cash or liquid assets required to continue its operations.¹  A lack of trust in financial institutions is often mentioned in consultations and surveys with Black entrepreneurs.

Figure 5: Sources of financing used to start a business (%)