Loans just one hurdle for Black entrepreneurs
Lack of access to capital leaves many business owners relying on personal accounts for funding
Before Pauline Thomas started her own business, Comfort Bras, she worked a corporate job at a multibillion-dollar firm and brought home a six-figure salary.
But whenever she applied for a bank loan, it wasn’t the dollar figure the person on the other side of the counter saw, it was her skin colour.
The day she applied for a mortgage and was asked for document after document to prove her income and how she made it — far more hurdles than she suspected her white counterparts would face — she called the bank employee out.
“You don’t believe I’m capable of making that much money… You’re not believing it because it’s me, because I’m Black, and I’m a female,” she said.
“The hurdles I have to jump are unbelievable,” the Pickering business woman told the Star.
These challenges are typical for many Black business owners in Toronto’s financial industry.
Lack of access to capital is one of the biggest challenges Black business owners face, whether from being denied loans or overlooked by venture capitalists who give their funding to whiteowned companies, said Andria Barrett, president of the Canadian Black Chamber of Commerce (CBCC).
Banking is very different for a person of colour, Barrett said.
“They’ve had bad experiences going into banks,” she said. “There is a history of systemic racism at banks. Black people have in the past been denied loans, so many are running their businesses through personal bank accounts.”
And using personal accounts for business has particular challenges, which have been highlighted during the
COVID-19 pandemic, Barrett points out.
Without a business account, many small business owners do not qualify for federal emergency funding from the Canada Emergency Business Account (CEBA). While the government expanded CEBA eligibility to include businesses with a payroll between $20,000 and $1.5 million (the initial range was $50,000 to $1 million), for the many Black-owned businesses that hire on a contractual basis or are not large enough, this funding is inaccessible.
A survey from the City of Toronto in 2015, found that only two per cent of black-owned businesses were large enough to employ more than 100 workers.
To help business owners in Black communities with financial services, The Jamaican Canadian Association, The Lions Circle African Men’s Association, and the CBCC are launching a joint initiative in summer 2021 called the Pan-African Credit Union (PACU). The goal of the initiative is to provide an alternative banking option for the Black community in Toronto and then expand across Canada.
Black entrepreneurs face other challenges, too, including supply chain access and procurement. Businesses are often considered too small, whether because of a lack of capacity to apply or not even being considered for contracts, Barrett said.
She wants this inability to gain access addressed and would like to see the three levels of government — municipal, provincial and federal — set targets for Black-owned businesses with, for example, three per cent to four per cent of contracts going to these communities. “We think it’s important that the government recognizes that we’re out here and that they should allocate a certain percentage to us,” she said.
Black businesses also have problems setting up offices or retail locations across the city. It’s the same issues they can encounter with residential landlords who are less willing to rent to Black tenants and it extends to the commercial real estate community, Barrett said.
Joel Kerr, founder of the Health Institute in Scarborough, who has a Bachelor of Physical and Health Education, Doctor of Chiropractic and Doctor of Acupuncture, says it was important to set up his physical therapy and health business close to home in the community where he grew up.
“I wanted to make sure that we built in my community of Scarborough and that kids who looked like me could realize that they can pretty much do whatever they need to do in a constructive manner to fulfil their dreams and their goals,” Kerr said.
Before setting up his storefront clinic, Kerr ran his business out of his van, driving from client to client. Like other Black business people, he had trouble getting approved for a loan, even with an elaborate business plan, before he was finally approved by the National Bank.
Barriers in the financial system can be measured, but cultural barriers are difficult to quantify. Expanding a network is essential for the culture of commerce, but for business owners who feel alienated or shut out of the conversation, this is yet another challenge to overcome.
These cultural barriers were a challenge for Lola Adeyemi, a Nigerian immigrant who founded It’s Souper, an afro-fusion soup company in Toronto in 2018.
She identified a strong appetite for exciting West African soups among her colleagues at her former IT consulting firm she built with her husband. When she brought in soup for potluck, people in the office would ask “Where can I get this?”
Adeyemi began doing her own research and used a personal line of credit to get her business off of the ground. In her research, she found and attended a Food Starter program, a business incubator that focuses on the food service industry. It was an investment that cost more than $1,000, but for Adeyemi it was worth it.
She brought her West African dish ideas to the program’s classes. These included the authentic African flavours found in her bacon-laden chilies and soups including chicken peanut and paprika carrot. But Adeyemi was only Black person in the program, and felt intimidated by the other food entrepreneurs’ and their cutting-edge gluten free and vegan dish business ideas.
“If I’m the only one here, would anybody really want to eat my food?” she wondered. “Would anybody understand my culture, my concept?”
Adeyemi considered dropping out of the program until she met a man who recognized her unique idea and became a mentor. “Just that one person, one person just giving me hope and letting me know that my idea was wonderful, was all it took.”
Adeyemi’s business quickly caught its stride. In 2019, she was nominated for the Grand Prix New Product Awards in the fresh food category by the Retail Council of Canada.
She arrived to the awards ceremony to find the auditorium filled with white CEOs, nominees, and judges. Once again, she was the only Black representation in the industry.
“I felt like a unicorn,” Adeyemi told the Star. “The only other Black people there were the servers in the auditorium, the people who work for the event centre. My husband and I looked at each other and we were like, ‘Wow, is this the 18th Century?’ ”
In 2020, these struggles are still prevalent in the Black community.
Yet, despite the challenges, Thomas, whose Comfort Bra company is in its second year, is happy she forged ahead with her business and encourages other Black entrepreneurs to take that first step and start their business.
“I would never tell a young Black person not to try because it’s going to be tough,” she said.
“It’s tough, period,” to be an entrepreneur.
It’s a sentiment echoed by Barrett, who stresses the importance of understanding what groups and resources are available.
“If you want to start a business, do it. Be brave, be bold, go for it,” she said. Her advice. “Don’t do it alone.”