What’s Behind Detroit’s Small Business Disparity?

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Why you should care

Because the equity gap in Motor City is much too wide.

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In Detroit, there are more than 40,000 Black-owned businesses. You might think that the sheer volume of minority-owned companies would help create a thriving business climate for Black entrepreneurs, but when you take a closer look at the data, a different kind of story emerges. Only 1 in 30 African-American-owned companies in Detroit has more than one employee, compared with 1 in 3 white-owned businesses. 

While African-Americans make up 80 percent of Detroit’s population, only 15 percent of Black-owned businesses have an annual revenue of more than $50,000.

“The numbers are still too low, and the equity gap is still too wide,” says Anika Goss-Foster, executive director of Detroit Future City (DFC). The issue, however, is not cut and dried. Michael Rafferty, vice president of small-business development at the Detroit Economic Growth Corp., says that class, as much as race, accounts for the disparity.

“One of the things I can say very clearly is that not having parents who are MBAs or CEOs makes the gap pretty serious,” Rafferty notes. One of the issues that has stymied fledgling African-American-owed businesses in Detroit has been a lack of access to cash. It’s an issue that has not escaped the notice of people in high places. Programs like the Entrepreneurs of Color Fund, a $6.5 million lending program with financial backing from JPMorgan Chase & Co., are helping ensure Detroit business owners get a fair shake. 

What we’ve seen from the … boots-on-the-ground outreach campaign is a lot of success for budding minority- and women-owned businesses.

Michael Rafferty, vice president, Detroit Economic Growth Corp.

“There are more grant initiatives and minority-based loan initiatives now than we’ve ever seen,” says Goss-Foster. The city, she says, is finally in a spot where “all the right players are on the bus.” And the news keeps getting better. About two years ago, Detroit mayor Mike Duggan announced an initiative for 10 businesses to receive a combined $500,000 in grant funding through Motor City Match, which connects new and expanding businesses with funding, real estate and technical assistance.

“What we’ve seen from the strong, boots-on-the-ground outreach campaign is a lot of success for budding minority- and women-owned businesses,” Rafferty says.

This success has translated into tangible solutions to problems that long plagued Detroit. For example, the city has been classified a “food desert” due to its lack of healthful food sources for residents. That classification is subject to change thanks to initiatives like the Green Grocer Project, which launched with a $500,000 seed grant from nonprofit the Kresge Foundation and with support from JPMorgan Chase. The project aims to facilitate sustainable grocery options in Detroit and to provide fresh-food options for residents at the same time. 

Goss-Foster warns that the struggle of minority-owned businesses is not just a Detroit issue, but one that’s evident in any big city where there are low-income neighborhoods. When Detroit and other cities can develop innovative ways to make sure “even that corner barbershop” feels included and has access to resources, she says, then the economic climate in distressed neighborhoods across the U.S. will truly begin to move in the right direction.