The latest data on Black business estimated there were 144,980 Black-owned businesses in Canada, representing 2.4% of the total number of businesses in the country. Many of these Black businesses (64.5 per cent) are owned by Black immigrants, with a high proportion being sole proprietorships. Notably, this is nearly 30 per cent higher than the number of businesses owned by non-Black immigrants (35.5 per cent).

As for why this might be the case, there are multiple explanations. Indeed, many people pursue entrepreneurship because of their passion for innovation, business, and financial freedom. However, data from interviews and surveys suggest that Black immigrants face challenges finding employment in the labour market or have low-paying jobs, leading them to turn to entrepreneurship. Part of these challenges are owed to the fact that the degrees and work experience obtained in Black immigrant home countries are often devalued or non-transferable based on Canadian policies or procedures. For example, approximately 46 per cent of Black African immigrants from 2016 – 2021 aged 25 – 65 have a bachelor’s degree or higher. This was higher than both the average for the total Black population in the same age group (32.4 per cent), and the average for the total population (32.9%). Yet, despite having higher levels of education than Black non-immigrants, they faced challenges finding meaningful employment.

In other respects, accents, language barriers, and even names may lead to unsuccessful recruitment experiences. Subsequently, feeling alienated by the Canadian market, many pursue entrepreneurship for steady income. They may do this by, finding a gap in the Canadian product or service market, working in areas outside of their professional training, or using their skills to serve a neglected area or group of people. So, inadequate opportunities, the devaluation of Black immigrant education, systemic discrimination, and low-paying positions are forces that may make entrepreneurship more attractive to Black immigrants, particularly in comparison to non-Black immigrants and naturalized Black Canadians.

Outside socio-economic forces, population size may also be a contributing factor as to why most Black businesses are owned by Black immigrants. 2021 data revealed that nearly 60 per cent of the Black population are immigrants, with Jamaica, Haiti, and Nigeria having the largest representations. Ultimately this increases the chances for a Black business to be immigrant owned especially considering that in 2018, more than a third of Black immigrant business owners came from the same three countries: Nigeria (14.2 per cent), Jamaica (12.1 per cent), and Haiti (10.2 per cent). Under this explanation the larger size of the Black immigrant population simply increases the likelihood of Black immigrant ownership in contrast to non-Black immigrants.

Why do Black Businesses Face Barriers and Challenges?

There are five reasons why Black businesses face challenges. The first is that Black entrepreneurs are often starting new businesses as opposed to taking over one. In turn, they don’t have forerunners to share best practices and local business contacts. This is particularly the case for Black immigrant entrepreneurs. Being that Black immigrants represent over 60 per cent of Black businesses, the lack of forerunners presents a major disadvantage to the landscape of Black businesses.

The dearth of generational know-how and understanding of best practices brings us to the second reason for the struggles of Black businesses: they need mentorship, financial literacy education, incubators, and accelerators. In a report by Bain & Company researchers found that about 70 per cent of Black entrepreneurs said they needed more training in technology, business fundamentals, marketing, and accounting to aid their success. However, when it comes to the mentorship, incubators, and accelerators that offer these services, in comparison to their non-racialized counterparts these resources are either inaccessible, unknown, or underutilized. With most Black businesses being immigrant owned, part of the explanation as to why resources are inaccessible or underutilized is clear: protectionist policies often exclude or limit Black immigrants from utilizing resources to support their business.

The pervasiveness of protectionist policies and culture leads us to the third point: Black businesses, (particularly Black immigrant businesses) may not have access to capital from banks or government loans. Access to capital is a challenge that Black business owners in general have identified. A major issue here is that there are awareness and knowledge gaps when it comes to navigating the loan system and understanding what funding options are available. Because they are unaware of these options, many are left with the impression that they must go it alone. For those that go it alone, they tend to use their own personal savings, often supplemented with funding rounds that rely on friends and family to support their business. A report from the Canadian Black Chamber of Commerce found that a significant proportion of Black business owners surveyed indicated they raised money from their community or funded it themselves as opposed to trying to borrow money from a bank. So, should their business fail to quickly generate revenue and turn a profit, failure becomes a sure reality that not only has personal financial implications, but community effects given that they will not be able to recoup their investment. Here, profit is important because Black businesses are less lucrative than white businesses, with Black male owners earning an average of $56,100 which was $9,500 less than other racialized groups, and $43,300 less than their white counterparts.

On a grander level, those aware of funding opportunities might be alienated. Whether it be loans from banks, government, venture capitalists (VC), or angel investors, there seems to be a lack of parity in lending to Black entrepreneurs, especially those in early-stage financing. Part of this is due to their lack of assets. Although not always the case, lesser assets can be in part attributed to the legacies of anti-Black racism. Nonetheless, banks, VCs, and angel investors may be more risk-averse given the lack of assets that can be used as collateral or to support applications. And for those that do receive funds, the interest rate may be higher than the average recipient.

The fourth point is related to the challenges of accessing funding, being the fact that more Black businesses are unincorporated than incorporated, and more than 95 per cent of unincorporated Black businesses have fewer than one employee. For those large enough to want to incorporate, over 91 per cent have fewer than five employees. Consequently, they are too small to incorporate. This means that a larger proportion of Black businesses will be unable to access loans or grants as they are often required to be incorporated.

The fifth point is that there are unestablished networks for business knowledge and service exchange in the Black community. Networks are often an underrated component of entrepreneurship, but if we look at Silicon Valley for reference, the startup and innovation culture in this region is vibrant and strong because of the network ties and social capital. This tends to be because many people in Silicon Valley attended the same school or collaborated in workplace environments for several years. This contributed to spillover effects, knowledge exchange, and business spinoffs, allowing individuals to leverage their network to open other businesses located in clustered, innovative, and entrepreneurial areas. For the Black community, it’s unlikely that they have benefited from these networks because their networks might be more localized with knowledge expertise outside of entrepreneurship. Also, given that a large share of Black-business owners are immigrants, the opportunity to build relationships with other individuals at Canadian institutions pursuing entrepreneurship was likely impacted.

How Can we Improve the Support Systems for Black Business?

Many organizations have emerged in recent years to support Black businesses by providing funding, offering mentorship, financial literacy support, and access to a larger network of not just Black entrepreneurs, but entrepreneurs in general. The federal government has also implemented funding and resources to support Black businesses such as the Black Entrepreneurship Loan Fund. Initially this was a$265-million fund committed over 4 years to help entrepreneurs with loans of up to $250,000. In February it was announced that the funding would be extended until the end of 2028. My focus is therefore on the ancillary pieces that need to be considered in business development.

An underappreciated lever for business is proximity to other entrepreneurs in the same industry and ad-hoc support. In a study on the impact of university entrepreneurial support, Shiri Breznitz and colleagues found that ad-hoc service support such as shared space and a larger community of member and graduate firms allow for network ties to be formed. This increases the chance of connecting with other entrepreneurs and businesses in the same industry. They also found that entrepreneurial support organizations can provide businesses with resources, while university incubators can provide knowledge, talent, and equipment. What we can glean from this study is the need to expand on support service models outside of funding that can support Black entrepreneurs. Black entrepreneurs need to be able to leverage knowledge and talent from industry professionals. More importantly, providing access to shared space will allow Black entrepreneurs to congregate and form clustered networks where they can benefit from knowledge exchange and innovative spillover effects. The power of these clustered networks is important because entrepreneurs who have broad and diverse social networks have stronger survival and growth rates with better abilities to innovate.

We should also consider current funding amounts and support at different stages. Much of what we see in terms of funding support focuses on the latter phases of business development and scaling, being when businesses are designed and have a proof of concept. It’s here that SMEs have access to greater funding from the federal government, often with stipulations. For example, businesses can apply for the Canada-Ontario Job Grant which provides up to $10,000 in funding to cover training costs. However, this requires the money to be spent on training through a third-party vendor, and for small employers with less than 100 employees (most Black businesses as they are predominantly sole proprietorships) need to contribute 1/6 of the training cost. For the Black Entrepreneurship Loan Fund, it provides loans up to $250,000 but requires a financial assessment of the business health and growth potential.

We can look to Oregon for how to improve this funding model. Although focused on technology, Oregon encourages businesses to take advantage of federal funding, namely the Small Business Innovation Research and Small Business Technology Transfer programs. These programs are designed to stimulate technological innovation while providing opportunities for small businesses to conduct research and development with commercialization potential. The funding comes in 2 phases: phase 1 grants assist extremely early-stage companies in doing proof of concept studies on new technologies and are valued at nearly $150,000. Phase 2 grants aid phase 1 companies to develop commercially ready prototypes to test with their customers and are valued at approximately $1.5 million. In short, the government helps firms to develop proof of concept and deliver products or services to market. Canada could leverage this model by financially support SMEs in researching the market they want to enter and fully develop a concept for their product or service. This could be followed by funding for trial periods. The idea is to provide Black businesses with enough funding and competency to perform in their industry and withstand economic and industry related shocks. This might give Black businesses the breathing room to successfully scale to the point where VC becomes feasible.

This isn’t an overarching solution to business growth in the Black community. But the key message is that Black people shouldn’t have to build businesses and manoeuvre through entrepreneurship alone, even if some believe that they shouldn’t rely on a system that has excluded them. My perspective is that Black businesses should be able to benefit from government and private sector support, just as non-racialized groups have. But to do this, they must be prepared in the same fashion.