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Minority Businesses and the Issues They Face

Updated on December 5, 2017

Asheville is a flourishing city located in the Blue Ridge Mountains of Western North Carolina. The city is known for a vibrant arts scene and historic architecture, including the dome-topped Basilica of Saint Lawrence, the vast 19th-century Biltmore Estate’s displays of artwork by masters like Renoir, the Downtown Art District’s plethora of galleries and museums, and nearby in the River Arts District, former factory buildings now house artists' studios.

Asheville has an estimated population of just over 89,000 people. Currently in Asheville 79.93% of the population is Caucasian, and 17.47% of the population is African-American, American Indian/Alaska Native, Asian, Native Hawaiian /Other Pacific Islander, Other Race or Two or More Races

Based on the population, in Asheville, NC, the lack of diversity is obvious. The lack of diversity cannot be resolved, however, the issues can be fixed with the resources that currently exists. So how is minority business an issue in Asheville when the population solves the issue?

There are only six African-American owned businesses that are certified as minority businesses through the Historically Underutilized Business Program in Buncombe County. According to the 2002 US Census, there are 858 African-American owned businesses in Buncombe County. On average, an African-American business sees average annual sales of $40,000 while a Caucasian-owned businesses see annual sales of around $400,000 on average.

Questions remain as to why more African-American owned businesses are not registered with the Historically Underutilized Business Program since there are over 800 in Buncombe County.

During my research, I found some clues as to why minority-owned businesses are not registered and some of the interesting disparities they face.

“Minority-owned businesses are less likely to get loans than non-minority owners. This is particularly true for businesses that have less than $500,000 in gross receipts.”

Receiving a loan could prove challenging for these businesses if the average annual sales are estimated to be around $40,000, then it is extreme difficulty to get a loan since a minority business usually does not have gross receipts of more than $500,000.

“The value of loans for minority-owned businesses is usually less than non-minority loans. For minority businesses with more than $500,000 in gross revenue, the average loan amount is $149,000. But non-minority business loans average $310,000, and the MBDA report says interest rates are often higher for minority business loans.

Due to “a real or perceived likelihood of rejection,” some minority-owned businesses avoid seeking loans. This could prevent these businesses from reaching their potential.”

For a Minority-Business to be a Historically Underutilized Business, they must be eligible under HUBZone. “HUBZone is a United States Small Business Administration (SBA) program for small companies that operate and employ people in Historically Underutilized Business Zones (HUBZones). The HUBZone program was created in response to the HUBZone Empowerment Act created by the US Congress in 1998.”

Eligibility for HUBZone:

• Must be a small business by SBA standards

• Must be owned and controlled at least 51% by U.S. citizens, or a Community Development Corporation, an agricultural cooperative, or an Indian tribe.

• The business’ principal office must be located within a “Historically Underutilized Business Zone,” which includes lands considered “Indian Country” and military facilities closed by the Base Realignment and Closure Act

• At least 35% of its employees must reside in a HUBZone.

This is one issue that really stood out. “It must be owned and controlled at least 51% by U.S. citizens, or a Community Development Corporation, an agricultural cooperative, or an Indian tribe.”

“Think about this for a moment: As a businessperson, your goal is to grow in scale and value.

How do you accomplish this if your company cannot raise outside equity if it exceeds your 51 percent ownership requirement?” We know that minorities lack access “to capital and therefore are unlikely to raise sufficient equity capital to control a company without outside financial assistance.”

The second hang-up, that 35% of the employees must reside in a HUBZone. This limits a minority business as well. Many successful businesses have people that work remotely or commute in order expand their business.

Until HUBzone eligibilities change, resources become more accessible, and stigmas dissipate, this area will continue to lack successful minority-owned businesses and minorities will continue to face disadvantages. There are programs and laws currently under review to help with the easement and success of minority business, however, the process seems to be at a standstill and my take years before the implementations are set in stone.

© 2017 Kimille Miller


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