Wisconsin is the fourth worst state for minority entrepreneurs to succeed, according to a new study produced by Lendio, a Utah-based online loan marketplace.
Using recent data from the U.S. Census Bureau and the U.S. Small Business Administration, the study analyzed factors across all 50 states and Washington D.C., including income equality, access to loans, percentage of businesses that are minority owned, small business loans and ownership rates.
There are 1.2 million active minority-owned businesses in the U.S. and, according to the study, 20% fail within the first year.
The study showed that low scoring states, such as Mississippi, West Virginia, and Wisconsin, saw “declines in the number of Community Advantage loans approved in their state from 2021 to 2022, as well as low minority business ownership rates.”
Part of the SBA’s 7(a) loan program, Community Advantage loans are designed to provide financing to small businesses in traditionally underserved markets, such as startups, veteran-owned companies and businesses in low-income communities.
“People of color own only 20% of U.S. businesses despite making up roughly 40% of the population,” the study states. “They have limited access to startup funding, lack networks and mentorship programs, and face discrimination and systemic biases.”
From 2017 to 2020, there was a significant increase in minority-owned businesses across the country: 64.8% for Native Americans, 28.8% for Pacific Islanders, 16.5% for Latinos, 13.6% for African Americans and 10.2% for Asians. According to the National Minority Supplier Development Council, minority business enterprises had a 22% revenue increase between 2019 and 2021, and they employed roughly 865,000 people, according to the report.
Despite this growth, the number of business loans that get fully approved for financing is only 35% for Asians, 28% for Hispanics and 27% for African Americans, according to the report.
In Wisconsin, according to the report, the minority population is 21% – minorities own 8.2% of startups and 6.6% of all businesses under two years old. From 2019 to 2021, these companies saw 63% job growth. Wisconsin gives fewer business loans to disadvantaged communities ($254 per capita). The national average is $351 per capita.
Compared to other states, Wisconsin has lower levels of income inequality with a Gini index score of 0.4464, according to the report.
With a lower level of income inequality, a high rate of minority business ownership (51.3%), and 40% job growth, Hawaii is the No. 1 best state for minority entrepreneurs, followed by the country’s largest states, including Florida, California and Texas.
