MICHAEL PAUL WILLIAMS AND EMILY C. DOOLEY
TIMES-DISPATCH STAFF WRITERS
Published: March 21, 2010
Updated: March 21, 2010
On April 3, 1889, -- 24 years to the day after Richmond fell to Union troops -- the first chartered black bank in the nation opened in the Jackson Ward residence of former slave William Washington Browne.
The following year, Browne's organization, Grand Fountain of the United Order of True Reformers, moved the bank out of his home into a new three-story edifice on Second Street.
"Four millions cut loose from bondage and sent upon the world absolute paupers, without one cent of money, now the owners of a great building and directors of a bank," a Browne biographer wrote. "What a marvelous change! One of the mottoes well said, '1865, Slaves; 1890, Bankers.'"
Jackson Ward, referred to locally as "The Cradle of Black Capitalism," would give birth to six black-owned banks during its zenith.
Today, Richmond has none.
Black enterprise -- a proud symbol of self-sufficiency after emancipation -- has struggled in Richmond and beyond since its segregation-era heyday.
The reasons offered include lingering racism, barriers to raising capital, lack of business experience, high unemployment, limited networking and desegregation: Black consumers now have the option to shop places previously off-limits.
"There was a circulation of the dollar within the African-American community before it left," says developer Kelvin Hanson, who is working to revitalize Jackson Ward and other neighborhoods.
"When desegregation happened, I think the African-American community, on both the entrepreneur and consumer side, lost sight of that purchase power and circulation of wealth in the community. As a result of that, business fell."
Now, at a time when most businesses are feeling the pain of the worst recession since the Great Depression, black entrepreneurs are particularly squeezed.
"Black businesses have less access to capital and therefore have a greater difficulty in general economic stress," said Oliver R. Singleton, president and CEO of the 400-member Metropolitan Business League, a Jackson Ward-based agency that promotes small and minority businesses.
"A lot of them are suffering more than their peers because capital access is the lifeblood of business," said Singleton, a former stockbroker just named 2010 Virginia Minority Small Business Champion of the Year by the Small Business Administration.
"You can't finance inventory, jobs and projects without capital. You can't expand."
Researchers say leveling the playing field for minorities might have helped to blunt the current economic malaise.
If the percentage of minority businesses had matched the minority adult population, they could have generated up to 11 million more jobs nationwide, says a January report by the U.S. Commerce Department's Minority Business Development Agency.
This recession is hitting minority businesses hard, it says. "Unless immediate action is taken, minority communities will continue to lag behind their nonminority counterparts, undermining the ability of the nation to quickly regain its economic footing."
Why the larger community should care about the plight of the black entrepreneur comes down to what kind of community it wants to live in, said Stacy Burrs, who has been head of minority business enterprise for both Richmond and the state.
"We spend a lot time talking about how to get rid of poverty," Burrs said, "but we don't spend a lot of time talking about how to build wealth in a community."
Burrs asks: Do Richmonders want to live in fear of certain communities or do they want wealth to spread its benefits in a positive way?
. . .
It takes money to make money, and African-Americans often lack enough capital to start or sustain a business.
The median (halfway between the high and low point) net worth for black families is $6,000, compared with a median of $70,000 for white families, said Robert W. Fairlie, a professor of economics at the University of California, Santa Cruz.
"This is not averaging in Bill Gates or anything. This is the median," said Fairlie, co-author of the 2008 book "Race and Entrepreneurial Success" with Alicia M. Robb.
Black businesses have lower sales, lower profits, fewer employees and higher closure rates. African-Americans in general are paid less, are more likely to be unemployed, have smaller inheritances and possess less home equity. The rate of home ownership is 73 percent for whites, 47 percent for blacks, Fairlie said.
In January, the black unemployment rate of 16.5 percent was nearly double that for whites and Asians, according to the Bureau of Labor Statistics.
And Fairlie -- who with Robb penned the Commerce Department's January report -- cited this key difference: Among black business owners, 13 percent worked in a parent's business, compared with 23 percent of white business owners. "That's where you acquire business experience," he said.
. . .
"Starting and maintaining a successful business requires access to capital and net worth," Burrs said. "The former has been stymied by lender discrimination; the latter, by a lack of personal wealth."
Minorities are less likely to receive loans than nonminorities. If they do receive money, it is often less than what their white counterparts receive, the Commerce Department report said.
The denial rate for minority firms is more than double that of nonminority firms, according to the Commerce Department report.
Forty-two percent of minority firms with gross receipts under $500,000 were denied loans, compared with 17 percent of nonminority firms. Minority firms paid 7.8 percent in interest on average for loans, compared with 6.4 percent for nonminority firms.
"The credit decision is often a subjective decision," Singleton said. "And in my experience, black businesses have found themselves on the short end of the stick in those circumstances."
Collateral, the strength of a business plan and whether a bank will invest in emerging businesses, often factor into a lender's decision.
Asked about reports citing lender bias against black entrepreneurs, Jim Strader, a spokesman for the Federal Reserve Bank of Richmond, responded:
"The Federal Reserve takes reports and allegations of unfair lending practices very seriously. . . . During our examination process, we do look for possible discrimination in small-business lending. If discrimination is identified during an exam, those cases are referred to the Department of Justice."
When asked Thursday about the number of complaints the Fed sees, he advised a reporter to file a Freedom of Information Act request. The Richmond Times-Dispatch filed the request for information on Friday.
Sometimes traditional lending isn't the route minority business owners go.
Last year, Lester Johnson Jr. and Johnathan Mayo got a loan -- under $50,000 -- for their marketing agency, Avail Marketing. It came from REDC Community Capital Group Inc., which provides money and credit to small businesses in the Richmond metro area.
The nonprofit partners with local and federal governments, as well as commercial banks.
"That was huge for us," Mayo said. "None of the banks would give us a loan."
Since REDC began lending money in 1996, it has helped finance 713 businesses, including 480 African Americanor women-owned firms that received a total of $17.6 million, or 58 percent of the money loaned to date, according to a written statement from Stephen J. Schley, REDC's president and CEO.
Most businesses REDC lends money to "lack access or are unable to qualify for traditional bank financing and/or have a need for a public subsidy" to make the project doable, he wrote.
Avail is next door to Mama J's restaurant, which Johnson and Mayo just opened with Johnson's mother, Velma Johnson.
. . .
Despite the challenges obtaining capital, there are positive signs.
The growth rate for black businesses exceeded that of any other group from 1997 to 2002, says Thomas Boston, a professor of economics at Georgia Tech and CEO of EuQuant, an economic consulting company.
During that period, the number of black-owned businesses increased 51 percent. That surpassed the 39 percent increase by Hispanics, 22 percent by Asian/Pacific Islanders, 11 percent by subcontinental Asians and about 8 percent by whites, he said, citing the most current census data available.
Boston acknowledges that some of his colleagues discount those numbers because many of those new black businesses were one-person outfits. Still, "It's relevant because that's the way people start businesses," he said.
But Boston acknowledges the limitations of such growth.
The biggest hurdle is not increasing the number of black businesses but "building businesses of skill and capacity," he said.
One noteworthy black business in the Richmond area is doing just that.
Richmond-based Astyra Corp., a technology and business consulting firm, had its best year last year.
Inc. Magazine recognized Astyra as one of America's fastest-growing privately held companies.
Astyra's success story dramatizes the struggle some black entrepreneurs face.
In 1991, when Astyra's Sam Young and Ken Ampy started their first business, Automation Concepts, they had no financing. They worked full-time jobs while building computers, writing applications and doing desktop publishing for their fledgling business.
"We started with nothing," Young said. "And so what we ended up doing is putting ourselves out on assignment. We didn't pay ourselves."
Every bit of money earned went back into the company.
In 1997, the two changed their focus to information-technology staffing and rebranded the company Astyra. At times, they were told they were "unbankable," but the two managed to get a line of credit to float payroll. The financing options grew with the company, which has 18 full-time employees and between 150 to 200 contract employees.
In 2009, Astyra's revenue was $14 million, up from $10 million the year prior. This year's goal is to grow 20 percent to $17 million or $18 million.
Young and Ampy also mentor businesses that are Metropolitan Business League members. "We definitely want to be businessmen first, but we're very proud to be black businessmen," Young said.
Still, some of the most successful black entrepreneurs are more comfortable keeping a low racial profile.
"Many businesses would prefer that their product or service speak for them rather than the ethnicity of the ownership. And I applaud that," said MBL's Singleton. "Race neutrality insulates you from the occasional negative perceptions that some people assign to black businesses."
. . .
Those negative perceptions are the consequences of a 150-year assault on the image of African-Americans that persists even today, Burrs said.
"We've never cracked the racial divide economically," laments Richard Waller Jr. of Waller & Company Jewelers, a family business that dates back to 1900.
"I still don't get enough people of the other race to just come in and shop with me," said Waller, whose business once was in Jackson Ward but is now near First and Broad streets.
During Jackson Ward's heyday, "You couldn't buy anywhere else," Burrs said. "We seem to have lost the motivation to think in those terms when you look at the buying habits of other ethnic groups."
What was viewed as an indisputable sign of progress is now viewed in some quarters with ambivalence.
"When desegregation allowed the black middle class other alternatives, they chose those alternatives," Singleton said. "At the end of the day, the black middle class decided, 'Hey, I'm going to move to Chesterfield County and I'm not going to bank with [the then-black-owned] Consolidated anymore. I'm going to bank with Wachovia.'"
With that freedom to shop, work and learn came an erosion of the self-reliance that built communities such as Jackson Ward.
Dr. William Ferguson Reid, who in 1967 became the first black elected to the General Assembly in the 20th century, says the trade-off -- freedom to chose -- was worth Jackson Ward's decline.
"Jobs are the key to economics, and more people have gotten into jobs that were closed to them . . . than the businesses we have lost" since desegregation, Reid said.
"The businesses that we have lost were not competitive."
Astyra's Young, who sits on the Virginia Minority Supplier Development Council, said being lumped in with other minorities can make it tough to compete. The black experience is different from that faced by Asian and Latinos, but many opportunities, such as a set-aside for minority contracts, came about because of the efforts by black entrepreneurs, he said.
"That's why these conversations are so tough," Young said. "If you give your opinion, you almost sound like a racist. But at the end of the day, you would hope everyone cares about their race . . . I want to make sure I'm looking out for the next black entrepreneur."
Today, the likelihood of a person's worth being determined by talent rather than pigment is higher than at any point in U.S. history, Burrs said. But it's up to black entrepreneurs to close the deal.
"The business first of all has to focus on excellence in what it's providing," Burrs said. "It does not help a business to focus on victimology."
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This could give us a great message about equality in entrepreneurship like in making a loan with a low rate.
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