Q&A: The importance of Financial Education for Black-Owned Businesses

Despite the challenges facing small businesses, Black entrepreneurs are still ready to seize opportunities. Black Americans were more likely than white Americans to start new businesses last year. And, a recent survey from Reimagine Main Street showed that 79% of Black business owners are optimistic about the current business environment.

August is National Black Business Month, highlighting the contributions of the approximately 2.6 million Black-owned businesses to the U.S. economy. We recently talked with Chaz D. Gaines, a Business Relationship Manager and Assistant Vice President with Citizens, who shared his insight on the opportunities and challenges for Black-owned businesses this year and beyond.

Citizens: How did the pandemic impact Black-owned businesses?

Chaz D. Gaines: 2020 really reset the board for so many different types of companies. The pandemic closed a lot of businesses, but it also made room for new ones. People are now much more socially aware of what is happening in the African American community, and there is definitely an opportunity to increase market share.

Citizens: How can Black small businesses take advantage of the economic recovery?

Gaines: I’m seeing startups happening in areas like restaurants and IT, based on opportunities people identified during the pandemic. But honestly, right now a lot of businesses are still just trying to survive. A lot of people suffered in the last year, and you need to think outside the box to identify opportunities for your company. It’s important to connect with other organizations and businesses in your community and see who you can work with. Take advantage of relationships and support each other — for example, I recently heard of two gym operators in my area who merged their businesses and customer files. By combining forces, they cut expenses and were able to create one successful, full gym.

Citizens: Are there any challenges that are unique to this community?

Gaines: A lot of the challenges are the same as those facing any business. It’s important for entrepreneurs to become financially educated and understand exactly what they need to move forward, whether they’re a new business or a seasoned operation. For example, the best time to qualify for financing or credit is when you don’t need it yet. I recently met with a Black business owner who had been in business for over 20 years but never had a line of credit (LOC). She had approached another financial organization she had worked with for over 15 years and was shocked when they denied her a LOC, despite her having a strong company. She had actually been gaining market share as a result of the pandemic and needed a LOC to manage staffing expenses. My team was able to secure a LOC to give her the liquidity she needed. Minority-owned businesses need to understand their finances and what they can qualify for. A good relationship with your bank can help you be ready for opportunities.

Citizens: What should Black business owners consider to ensure they are on a firm financial footing?

Gaines: Look at your expenses — wealth is about what you can keep, not what you can earn. Examine your books and see where you can cut costs. There are many types of expenses such as merchant services, Internet service, or business insurance that you may be able to negotiate better deals on with your vendors. Talk to your bank about where your business is right now. It may be a good time to get a line of credit or to refinance. And don’t forget to reevaluate who you are working with regularly. Make sure that any accountants, consultants, or other professionals you work with are the right fit for your current needs. Have one-, three-, and five-year plans with benchmarks to make sure you are reaching your goals.

Citizens: What types of resources are available to support Black-owned businesses?

Gaines: Many minority-owned businesses were able to take advantage of stimulus money through the Paycheck Protection Program (PPP) or Economic Injury Disaster Loans (EIDL) to help secure their future. SCORE offers a lot of resources for mentoring, and there are many types of grants available through community and state resources. If a business meets its requirements, the Small Business Administration (SBA) offers opportunities to get reasonable loans at favorable interest rates.

Citizens: What can Black-owned businesses do to help their business grow?

Gaines: One small but important thing is to collect customers’ contact information. That will enable you to send an email, stay connected, communicate, and build a relationship. On a larger scale, be specific about what you want to accomplish and have a purpose besides simply making money. Define what you want to do and create a process to make it happen. Don’t be afraid to reach out to people in your community that might be able to mentor you and help you scale. Talk to your banker and identify pain points that might be holding you back.