Although Black people were much more likely to lose a small business at the start of the pandemic, since that time Black business ownership in New Jersey has surged 25%, compared to 4% for the rest of the population, the New Jersey Economic Development Authority said this week.
According to NJEDA Chief Economist Richard Kasmin, the increase in entrepreneurship after the COVID-19 economic shock is evidenced by applications to start new businesses. The pace of “high-propensity” business applications filed in New Jersey has increased from a rate of about 3,000 per month before the pandemic to near 4,000 now – a 30% overall increase. High-propensity applications are businesses most likely to be incorporated and create jobs, as opposed to unincorporated sole proprietorships.
The evidence suggests that in New Jersey a growing number of these new entrepreneurs are Black, Kasmin said. To estimate small business ownership by race, NJEDA used the U.S. Census Bureau’s Current Population Survey (CPS) microdata on whether individuals reported being salaried or self-employed. Only those who said self-employment was their primary income source were included.
Almost 40% of the 20,800 reported increase in self-employment between 2019 and 2021 were Black residents, Kasmin pointed out Monday in his Economist’s Corner blog. “Given Black residents account for approximately 20% of New Jersey’s labor force, the 40% share of self-employment shows Black residents are taking up a surprisingly large share of recent new business creation.”
Kasmin said pandemic-related job losses combined with abundant opportunities to innovate have encouraged many people to start their own businesses. “For the economy, entrepreneurship drives the evolution necessary to keep an economy growing. For individuals, entrepreneurship and the value created therein generate economic opportunities and wealth.”
While the growth in entrepreneurship in the Black community is a welcome sign, Black business owners need outside sources of financial capital to invest in and grow their ventures to achieve long-term results, Kasmin said.
“Unfortunately, access to credit is where the Black community has had one of its biggest challenges with entrepreneurship and business cultivation,” Kasmin said. “The New Jersey Economic Development Authority (NJEDA) has been working with the Federal Reserve to understand gaps in credit access for minority small business owners.
“As part of this work, we will be meeting with credit organizations, such as community banks and community development financial institutions (CDFIs), to better understand how they approach business with minority small business owners and see where gaps in credit access might be closed,” Kasmin said. “Moreover, in an effort to close some of these gaps, the NJEDA provides credit and grants to small businesses that might not be able to secure traditional bank financing.”
NJEDA’s small business products include improvement grants, lease assistance, direct loans and loan guarantees and participations, as well as direct loans to other credit providers such as CDFIs to help lever credit products. The NJEDA also partners with the African American Chamber of Commerce of New Jersey to offer a Small Business Bonding Readiness Assistance Program to help businesses position themselves to bid on government contracts.