by Renata Sago
(The Financial Journey is a unique series focused on financial education and opportunities. These stories have been created through a strategic partnership between Wells Fargo and Word In Black.)
Black women are one of the fastest-growing groups of entrepreneurs in the United States. According to research from the Harvard Business Review, Black women are more likely to start a business than White women and men.
An analysis of the Census Bureau’s Annual Business Survey found that Black-women-owned employer businesses increased by 18 percent between 2017 and 2020. Yet, the longevity of these businesses depends on many factors, including how ready a business is to evolve to the next level.
For Alima Redding, senior vice president and business acquisition manager for Wells Fargo, capital and coaching are important tools that determine long-term viability. When she was a child, Redding got her first glimpse of community entrepreneurship in action by helping her mother work at summer street festivals in northern New Jersey and New York City.
“She would make falafels out of an old school bus that she turned into a food truck,” Redding remembers. “I would be there with her scooping Italian ices. I think I may have eaten more products than served,” she laughs.
Today, Redding and her team strive to help hundreds of small business owners in Philadelphia and Baltimore get the support they need in order to thrive.
“The businesses are putting their kids through college or putting food on the table or paying for their parents to get support in their senior years,” says Redding. “So when you see that, it’s not just the community. It’s creating generational sustainability.”
The success of Black small businesses, overall, has varied since the start of the COVID-19 pandemic. The Federal Reserve Bank’s 2021 Small Business Credit Survey found that 92 percent of Black small business owners reported serious financial hardship. This was the highest rate compared to other groups.
Some of the challenges Black small businesses encounter has to do with banking. Some businesses might not be able to maintain monthly rent or struggle with cash flow and credit scores. In these instances, Redding says it’s important to develop a relationship with a bank that is more than transactional. Recently, her team was working with a customer that was awarded a government contract, but did not have the capital to fulfill its requirements.
“Wells Fargo partnered with the local CDFI [Community Development Financial institution] to help the customer gain access to capital,” says Redding. “The CDFI was able to help them.”
In another instance, her team was able to directly support a small business looking for funding when other banks could not. “[The business was] looking to expand and take on larger contracts and Wells Fargo partnered internally to get this small business customer access to capital,” says Redding.
Possibilities in this world are endless for Black women looking to grow their businesses.
Here’s some advice that Redding shares to keep momentum going:
- Know your local resources.
Educate yourself on what programs are available through local financial institutions and which ones will support your goals.
- Know your banker.
Grow a relationship with a banker that is looking out for your best interest of your business and not necessarily the best interest of themselves.
- Be prepared.
Develop an understanding of what financial institutions are looking for when it comes to extending credit and what you’ll need in order to meet those requirements. It’s a good idea to partner with an accountant that understands your business growth strategy and can help prepare the right financial documents you’ll need before applying for certain lending products. You’ll also want to make sure your tax returns are done properly and you have separate accounts for personal and business expenses.
- Have a heart.
It’s important to care about the community that you’re servicing.
“There’s one thing to lend money to a business and there’s something else to lend money to a business that’s supporting a community and their staff and to understand the intricacies of their business,” says Redding.
(Wells Fargo Bank, N.A. is a member of the Federal Deposit Insurance Corporation.)