Starting a business is one thing, but getting enough money to build it into a lasting company is another. This is the current reality of Black entrepreneurship in America. Black Americans are launching businesses at significant rates. However, the capital available to help those companies scale is considerably smaller than the entrepreneurial activity might suggest. The latest numbers make the contrast impossible to ignore.
How many Black entrepreneurs are starting businesses?
Kauffman reports a 2025 new-entrepreneur rate of 0.45% among Black Americans, compared with 0.29% among White Americans. Meanwhile, Latino entrepreneurs had a higher rate at 0.53%. Altogether, Black entrepreneurship is outpacing White entrepreneurship, but Latino entrepreneurs are starting businesses at the highest rate of the three.
Gusto’s 2024 New Business Formation Report found that Black or African American entrepreneurs made up 5% of new business owners in 2023, up from 3% before the pandemic. The U.S. Small Business Administration (SBA) also reported that the share of Black households owning a business jumped from 5% in 2019 to 11% in 2022. The big question now is whether they have access to funds to keep them running.
How large is the Black entrepreneurs’ funding gap?
The Black entrepreneurs’ funding gap is glaring: U.S. startups with at least one Black founder received $942 million in venture funding in 2025. This figure may sound large. Yet, it is just 0.32% of all U.S. venture capital invested that year, according to Crunchbase.
This is a sharp decline from 2021, when Black-founded startups raised $5.2 billion during the investment surge after the racial justice protests of 2020. While the dollar figure moves dramatically from year to year, the underlying share remains small.
The funding gap extends far beyond venture capital. Kauffman stated that only 16% of Black-owned businesses’ financing needs were being met. In comparison, 47.9% of White-owned businesses had their financing needs met in the same 2021 data. Black-owned firms were also less likely to receive bank loans.
Why do Black entrepreneurs struggle to access capital?
Research points to several factors, including credit constraints, wealth differences, investor networks and how founders are assessed. Historically, Black-owned startups have launched with less capital and faced greater difficulty accessing financing. This is not a new pattern. Indeed, many Black-owned brands have grown to shape industries, even without much support at the start.
According to research published by the National Bureau of Economic Research, Black entrepreneurs were less likely to receive external financing and were more likely to avoid applying because they expected rejection. Investor relationships also play a role here. A 2026 Journal of Finance study examining more than 160,000 founders and investors found that Black founders were less likely to have traditional success markers, such as patents or previous entrepreneurial experience. It also found that Black venture-capital partners invested more often in Black founders. Furthermore, those investments had higher successful exit rates.
These findings suggest that the problem goes beyond simply having a better pitch. In essence, relationships are crucial: who knows the investor, who has worked at the same company, who attended the same school can all matter.
What is being done to close the funding gap?
Public lending programs and capital-readiness initiatives are signs of progress, but the numbers do not show that the huge gap has been closed. In its fiscal 2024 report, the SBA backed 5,200 loans worth $1.5 billion to Black-owned businesses. In addition, the number of loans more than tripled from FY2020.
The Minority Business Development Agency has also expanded support. Its Capital Readiness Program enrolled more than 6,300 entrepreneurs in its first year. It also helped participants raise $263 million in capital while forming 2,636 businesses.
Those figures show that targeted programs can connect entrepreneurs with money and the networks needed for growth. However, they do not prove that the national funding gap is closing. This distinction matters because access to funds determines whether a founder can hire employees, develop a product, open another location, or survive a difficult year.
For a small business, access to capital can determine how quickly an owner responds to rising costs, invests in technology, enters a new market or explores new opportunities. If a company cannot secure timely financing, its growth can be slow. As a result, the owner may have to rely more heavily on personal resources.
Census research has found that Black-owned businesses tend to operate with less financing and employ fewer workers than White-owned firms. It also found that Black-owned firms are less likely to receive bank loans and more likely to report that a lack of financing reduces profitability.
Many founders respond to that gap by building differently, rather than waiting for it to close. Some are scaling slowly, funding growth out of revenue and turning side hustles into full-time income. For some, that means finding other ways to raise the money needed to keep their companies running.
With more capital, Black-owned businesses can have more employees and greater opportunities to build business wealth and drive economic growth. The ambition is already evident in the numbers. Nevertheless, the big question is whether America’s capital markets will catch up quickly.
