Despite Massachusetts' increasing diversity, Black and brown business owners are still rare.
Black and Latino people now make up more than a fifth of the state's population but own just over 3% of businesses with employees — less than half the national rate of Black and Latino business ownership, according to a U.S. Census survey of entrepreneurs released in 2018.
If the self-employed are factored in, Black and Latino people own about 9% of all businesses in the state, also less than half the national average, according to the most recent Census survey in 2012.
“We're an exceptional state. We're a wealthy state. Our numbers should look better than they do,” said Malia Lazu, a lecturer at the MIT Sloan School of Management. “Mayors and the governor really need to incentivize how to hold people accountable. You have to feed the supply side of creating businesses.”
State leaders are aware of the problem, which is even worse in the construction and design industries. Black and Latino people combined own less than 3% of the businesses available to bid on often lucrative contracts from Massachusetts’ public agencies, according to a 2017 disparity survey commissioned by the State Division of Capital Asset Management and Maintenance, or DCAMM.
That’s about a percentage point higher than 2010, according to DCAMM’s previous disparity report.
“There's not a lot of diversity,” Lt. Gov. Karyn Polito said last year, describing a classroom for contractors in Massachusetts getting recertified. “I think about that a lot in my work with the governor and why we need to change that.”
Minority business owners and their advocates point to a range of causes for these low ownership rates — from a longstanding racial wealth gap to the struggle to get bank loans and meaningful help from state officials charged with creating more access and opportunity for minority entrepreneurs.
The reports commissioned by DCAMM found significant disparity between minority firms available to do the work and the percentages actually receiving contracts from state agencies. Gov. Charlie Baker last year initiated changes in this system to elevate the state Supplier Diversity Office into a stand-alone agency, to beef up compliance with regulations and to increase levels of contracting with companies owned by minorities.
Such steps can lead to the growth of minority businesses. Advocates stress that government contracts can become a reliable source of revenue for a small business, which leads to more hiring in the community and bigger projects for the company.
The Massachusetts economic development agency also gives out millions of dollars in grants and loans and offers technical advice to fledgling small businesses. The quasi-public Massachusetts Growth Capital Corporation spends millions on local community development groups that help small businesses, especially in the state’s 26 gateway cities, which often have higher Black and Latino populations.
But the state still lacks precise racial and ethnic data on the business owners who get that money.
“We’ve got to be more explicit about who's actually not being served,” said Orlando Watkins, vice president for programs at The Boston Foundation. “I think the governor is doing some of that, increasing his interest in that. So we've got to keep pushing.”
Standing outside a renovation project at a brick rowhouse in Roxbury last month, architect David Lee said he can just about count the number of Black-owned construction companies on one hand.
“The fact that you can probably name them all is problematic,” he said.
Government mandates in the 1970s and 80s to put minority-owned businesses to work were effective and enforced, he said. But courts overturned the mandates as discriminatory, so they were replaced by goals to encourage contractors and agencies to hire certain percentages of minority companies on public projects.
Lee said white-owned companies often did the bare minimum to hit those goals.
“I always said, ‘Hire me because I'm a good architect. Don't try to have me provide paper or something so you can get your numbers up,’” he said.
Both Baker and Boston Mayor Marty Walsh have faced criticism for the very low rates at which their agencies and departments have contracted with minority-owned businesses by. Last week, the GBH News Center for Investigative Reporting obtained a portion of the city of Boston’s draft disparity study, which showed that just 1.2% of the city’s contracts went to Black and Latino businesses over a five-year period.
Adrienne Benton owns the Boston- and Lawrence-basd technology firm Onyx. She said leaders in both Boston and the state are trying to help, but they frequently create special avenues for minority-owned companies that don’t actually lead anywhere.
“When you present as Black or brown, you're sent into this whole other track,” she said, and that track provides no meaningful business. “This is not to say we want to tilt the scale and not compete. But at the same time, when you're starting and you're so far behind in so many different ways and you don't have access to certain things, it does begin to feel like true barriers, true obstacles.”
The biggest barrier facing Black and Latino small business owners is accessing capital to get started or grow. Most Black and Latino-led companies are reticent to apply for loans — and when they do, they experience much higher rates of rejection than white male applicants, according to recent studies by the Federal Reserve.
Benton believes “unspoken biases” play a big role in the lending process.
“When you approach an entity about getting money for an idea that you have or for your business proposition, being an African-American female puts extra layers of challenge on things,” she said. “If I had the same business proposal that I proposed to lenders many years ago and I looked different, I think that I probably would have been received differently.”
A root problem in accessing capital remains the wealth gap separating Blacks and Latinos from whites who have access to more equity — bigger earnings and savings, higher rates of home ownership and relatives with assets. All are ingredients for hatching a business.
One small effort to address that equity problem is happening at City Fresh Foods in Roxbury, which makes meals for schools and the elderly in a big commercial kitchen. The company just offered longtime employees — nearly all of them people of color — a chance to be co-owners of the business.
“You get a chance to become part owner. Why not jump in and take that?” said Licinio Montrond, who has worked at City Fresh since he graduated high school. He’s in the process of buying 80 shares and is quickly seeing a shift in his viewpoint.
"I look at waste and other things different,” he said. “Now I don't want to basically throw away my money, so to speak, because at the end of the day, it's up to me and the rest of the part owners to make sure we make a profit.”
Sheldon Lloyd — one of two African-American brothers who started the company in 1994 — said he has wanted to shift to an employee-owned business for a long time.
“We all know there's a big wealth gap around assets, especially in the communities of color. So this is a chance for folks to get a little something,” he said. “We've actually created folks here who have gone out and run their own businesses. It's been part of our culture (that) more will participate, bringing us to the promised land.”
The needle has moved very slowly on that promise of equity. And the coronavirus has pushed the needle back. Some estimate that 40% of businesses owned by people of color in the U.S. have closed down since the pandemic began, precisely because so many of them are small and don’t have a cushion of savings.
