The number of small businesses sought for financing was stable pre-pandemic, but dropped since 2020 – not because people didn’t need funds, but because they were discouraged by the expectation of disapproval from traditional financing sources. Indeed, the percent of founders who received they entirety of their requested funding sharply decreased during the same period, leaving more businesses with a financing shortfall.

Not surprisingly, early-stage minority-owned businesses suffered bigger financing challenges.

While access to capital is a critical issue for minority firms during periods with or without an economic crisis, minority firms have been hit the hardest during the past few cycles.

According to an awarded research project (Sanchez, Mederiros, Huyser) by the Stanford Center on Poverty and Inequality, between 2005 and 2009, hispanic households lost 66% of their wealth and black households lost 53%, while white households lost only 16%.

Similarly, the Kansas City Fed found minority-owned businesses to be most vulnerable during the COVID-19 pandemic.

With another recession lurking around the corner, minority business owners and entrepreneurs must take on the upcoming challenge and prepare for an even tougher environment.