Executive Summary

Arizona is home to 641,000 small businesses,¹ and members of racial and ethnic minorities own a little over a quarter (28%) of small businesses in Arizona.² Studies have demonstrated that ethnic-owned businesses³ face disproportionate challenges in starting and maintaining their businesses, including systemic barriers to accessing financial capital,⁴ challenges in accessing relief funds,⁵ and higher employee turnover during times of crises.⁶ These challenges have been compounded in recent years by a pandemic as well as an increasing demand to be environmentally conscious and prepared for climate change. 

Reliable and accessible data can empower leaders to make decisions that improve the livelihood of ethnic communities. This report presents the results of an exploratory study investigating the experiences of ethnic small business owners on the topics of access to capital, impacts of COVID-19, environmental sustainability practices, and climate change. We present primary data collected through a phone and web survey and interviews with small business representatives in Arizona. Our research sheds light on issue areas in which ethnic-owned small businesses are under-resourced and understudied.

Our survey sample of more than 400 small businesses operating in Arizona, supplemented by five in-depth interviews, yielded four key findings: 

• Black- and Latino-owned businesses face more barriers to accessing financial capital than white-owned businesses. Black-owned businesses were almost three times more likely to report challenges in accessing capital than white-owned businesses (52% and 18%, respectively). Latino-owned businesses (32%) were almost two times more likely to report barriers to accessing capital relative to white-owned businesses. Among those businesses that reported experiencing challenges in obtaining funds or capital, the most common barrier Black- and Latino-owned businesses identified was an insufficient amount of financial capital (71% and 68%, respectively).

• Ethnic-owned businesses continue to fight an uphill battle to recover from COVID-19. Among small businesses surveyed, Black-owned businesses were more likely to report that the COVID-19 pandemic had a “large negative effect” (60%) than Latino- and white-owned businesses (41% and 46%, respectively). Additionally, compared with white-owned businesses, Black-owned businesses were twice as likely to anticipate a need for financial assistance or additional capital in the next six months (26% and 54%, respectively). Over a third of Latino-owned businesses (37%) anticipated this financial need.

• Ethnic-owned businesses were more likely to acknowledge the impacts of climate change than white-owned businesses. Latino- (43%) and Black-owned businesses (42%) were more likely than white-owned businesses (29%) to rank the risks resulting from climate change as a high or medium priority.

• Ethnic-owned businesses are actively engaged in environmental sustainability planning. Black-owned businesses were twice as likely as white-owned businesses to report that they intended to develop a formal sustainability plan in the future (38% and 19%, respectively). Latino-owned businesses (23%) were also more likely than white-owned businesses to report they will develop a sustainability plan. White- and Latino-owned businesses (55% and 52%, respectively) were more likely than Black-owned (40%) businesses to report they did not anticipate the need to develop a sustainability plan in the future.

Read the full report here.

Endnotes

¹ In their state profiles, the U.S. Small Business Administration (SBA) defines small businesses as independent businesses having fewer than 500 employees. SBA Office of Advocacy, “2022 Small Business Profile: Arizona,” August 31, 2022, available online.

² SBA Office of Advocacy, “2022 Small Business Profile: Arizona.” We estimated the share of racial and ethnic minorities by using reported non-Hispanic white business divided by the sum of respondents reporting their ethnicity and race. The complement of this is the estimated percentage owned by people of color. 

³ Throughout this report, we use the terms “ethnic-owned businesses” and “minority-owned businesses” interchangeably. Minority group members in the U.S. include, but are not limited to, individuals of Asian, Black, Latino, and Native American backgrounds.

⁴ Timothy Bates and Alicia Robb, “Has the Community Reinvestment Act Increased Loan Availability among Small Businesses Operating in Minority Neighbourhoods?” Urban Studies 52, no. 9 (July 1, 2015): 1702–21, available online.

⁵ Robert Fairlie and Frank M. Fossen, “Did the Paycheck Protection Program and Economic Injury Disaster Loan Program Get Disbursed to Minority Communities in the Early Stages of COVID-19?” Small Business Economics 58, no. 2 (February 1, 2022): 829–42, available online.

⁶ Shinae L. Choi,  Erin R. Harrell, and Kimberly Watkins, “The Impact of the COVID-19 Pandemic on Business Ownership Across Racial/Ethnic Groups and Gender.” Journal of Economics, Race, and Policy 5, no. 4 (December 1, 2022): 307–17, available online.