For many women, self-funding¹ is a personal choice made to not saddle their business with debt. For Black women entrepreneurs, this is often the only way they can fund their businesses since other options have historically not been available to them.

Approximately 42% of new women-owned businesses in Canada are created and owned by Black women.² 60% of these entrepreneurs are immigrants of African and Caribbean descent; very well-educated and residing in large urban cities such as Toronto and Montreal.³ Many Black women also have an inherited “do-it-yourself” mentality which translates into their business outlook. 

In a 2021 survey, 81.4% of Black women entrepreneurs used personal financing to fund their business.⁴ These women turned to credit cards, personal savings, family loans and online and payday lenders where it may be easier to qualify for funding but leaves their businesses trapped in a high-interest cycle of debt.

Yet, these women would know that access to mainstream funding is vital to the growth and long-term sustainability of their businesses, with 78.5% of Black women entrepreneurs citing that financing and the cost of borrowing was a major issue.⁵ So why are they not accessing the business loans they need?

 
Here are Five Reasons Why

#1 - The Juggle of Being a One-Woman Operation

Many Black women entrepreneurs build service industry businesses in CPG (consumer packaged goods), artistic, food and hospitality which are extensions of their family businesses and culture. Though often easy to begin with little funding, these businesses are often one-woman operations that struggle to meet the demands of their business as they grow. It is challenging to be “all things” to a business, so while their service quality is high and customer demand is growing, the administrative side may be sidelined.This means that financial records or other paperwork needed for loan applications are not in place.

#2 - Distrust of Financial Institutions

Low trust in banks is widespread for Black communities,  based on real-world experiences of bias and discrimination - both personally and among their peers. Many women express a deep seated belief that banks “won’t lend to people like me.”6 A related challenge is that information about business funding options is not reaching this group. A recent study found that “only 22 percent of Black entrepreneurs knew about the Business Development Bank of Canada or Export Development Canada, despite those organizations offering the largest federally funded programs that support businesses in Canada.”7

#3 - The Hustle Culture

In many Black communities, the hustle culture is alive and well. You make a product or have a service, sell it, trade it, build out more, gather opportunities from as many ventures as you can and primarily use cash for transactions. As the business grows from hustle through startup to setting up as a partnership or a corporate entity, the hustle skills are not sufficient. Creating a business plan, managing accounting and other financial obligations are often not taught within family/community networks and with limited learning opportunities in secondary school and beyond, Black women are often left to their own devices to source out and learn this information.

#4 - Generational Wealth

As the Canadian population ages, the first wave of Caribbean and African immigrants from the 60s and early 70s are only now starting to see their second generation of children grow into business leaders. In comparison to many other settler groups in Canada who have multiple generations of wealth, the Black community experienced systemic inequalities that blocked efforts to build wealth. There are not a lot of avenues for Black women entrepreneurs to turn to in terms of inherited wealth or the ability to borrow from family to bootstrap their business.

#5 - Culture and Community

The culture of many African and Caribbean communities is very much one of “we do it ourselves” mentality. Many first- and second-generation parents built their own homes and businesses without any financing from an institution. That sense of purpose was born of their inability to often be even allowed into institutions because of their race so it became easier and faster to simply band together as a community to build homes and businesses. Further, many Black women entrepreneurs are often loath to take on debt , concerned about high-interest rates, repayment terms and loan defaults. Even though taking out a low interest loan could enable better growth and long-term financial stability, the concept of good debt vs. no debt is a very strong sentiment in the culture.

AFIA DEI Index was created to address these systemic barriers to financing for women entrepreneurs in all their diversity. By working with banks and other funders who are committed to change, we can shift culture, policies and practices to create equitable and positive experiences for women entrepreneurs and greater access to financial capital to grow their business ventures. 

Sources:

1. Self-funding means using funds from personal savings or credit cards and/or borrowing from family and friends
2. WEKH | 2021 | The State of Women’s Entrepreneurship in Canada
3. BBPA, Casa Foundation, de Sedulous & WEKH | 2021 | Rise Up: A Study of 700 Black Women Entrepreneurs
   
4. 4 BBPA, Casa Foundation, de Sedulous & WEKH | 2021 | Rise Up: A Study of 700 Black Women Entrepreneurs
5. BBPA, Casa Foundation, de Sedulous & WEKH | 2021 | Rise Up: A Study of 700 Black Women Entrepreneurs
6. Women’s Enterprise of Canada (WEOC), | 2022 | Bootstrap or Borrrow, Improving Access to Financing for Women and Non-Binary Entrepreneurs in Canada
7. Canadian Black Chamber of Commerce | February 2021 | Building Black Businesses in Canada: Personas, Perceptions & Experiences

Other Resources:
Anne Kniggendorf | May 2, 2019 | The barriers to funding equality persist for Black women.   
African Canadian Senate Group  | May 2021  | Inclusive Entrepreneurship: Exploring the Barriers Facing Black Entrepreneurs in Canada
Elena de Luigi  | May 26, 2021  | Black entrepreneurs in Canada facing systemic racism and other barriers to success, new study finds 

Canadian Press | April 15, 2021 | Most Black female entrepreneurs face financing hurdles