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Native-owned businesses make up a small percentage of companies in the United States
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Less than 1% of SBA 7(a) and 504 loans are awarded to local business owners each year
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Several programs, including grants, can help local entrepreneurs succeed
If you look at the statistics of small business owners across the country by ethnicity, one group is significantly smaller. According to the Federal Reserve Banks 2022 Small Business Lending Survey, less than 1 percent of all businesses in the United States are locally owned. However, several nationwide programs aim to change that, and statistics show that this percentage may increase as access to capital and resources increases.
If you want to know the state of Indigenous-owned businesses in 2023 and what’s in place to help new and existing companies thrive, you’re in the right place.
What is a locally owned business?
To some extent, it depends on who you ask.
Although US surveys (including those conducted by the Census Bureau) often define Native Americans as Native Americans and Alaska Natives, some groups include Native Hawaiians. For example, the Minority Business Development Agency (MBDA) has historically grouped projects under the American Indian, Alaska Native, and Native Hawaiian (AIANNH) umbrella.
For the purposes of this conversation, we’ll go with the Census Bureau designation and say that a Native-owned business is Native American or Alaska Native-owned. If we include Native Hawaiian business owner demographics, we will specifically mention it.
Locally owned business statistics
The Census Bureau, the Federal Reserve, and the Small Business Administration provide annual data and demographics on small businesses in the United States.
Census Bureau Annual Business Surveys
When the Census Bureau released the results of its 2020 Annual Business Survey (ABS), it revealed that there are just over 26,000 local entrepreneurs across the country. Those companies employed more than 215,000 people and generated $35.8 billion in revenue.
Native Hawaiian and Other Pacific Islander-owned businesses grew to 7,331, employing more than 51,000 people and generating $8.5 billion in revenue.
The Bureau recently released preliminary data on business characteristics from the 2022 ABS, which shows that the number of Native-owned businesses in the United States is increasing. The data shows that in 2021:
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48,582 local businesses employing 307,933 people, generating $54.4 billion in revenue.
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8,324 Native Hawaiian and Other Pacific Islander businesses employ 53,277 people with $10.5 billion in revenue.
Federal Reserve 2022 Small Business Loan Survey
All 12 Federal Reserve Banks come together for this nationwide survey. The 2023 Report on Employer Firms is a compilation of results from the 2022 Small Business Credit Survey (SBCS).
That report and the full 2022 data reveal some small business statistics for local owners:
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Local business owners make up less than 1% of all business owners
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40% of all businesses owned by locals are 0-2 years old
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50% of local firms surveyed have less than $25,000 in outstanding debt.
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51% of local entrepreneurs received all or most of the funding they applied for, but 44% received none.
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23% of local business owners said their company’s current financial situation is bad; 49% said it was fair
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The most popular type of financing among local companies was credit lines from large banks (53%) (48%).
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37% of locally owned businesses were operating at a loss at the end of 2021
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The most popular reason for seeking financing was to pay operating expenses (79%), followed by the search for new business opportunities (64%).
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Only 56% of locally owned businesses have relied on funding from their owners’ personal savings, friends or family in the past five years, the lowest percentage of any group.
Note that notes in the report state that because the sample size of locally-owned businesses was too small, applicants seeking loans, lines of credit and cash advances were excluded from the tables showing approval rates.
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A study by Journal of Marketing Research showed that racial bias affects loan approval for minority business owners. White business owners were more likely to be approved for financing than their black, Hispanic, and Asian counterparts.
Small Business Administration credit report
The SBA credit report is updated weekly. It shows approval rates for 7(a) and 504 loans from the Small Business Administration (SBA) based on business owner demographics.
Local business owners make up a small portion of both loan programs.
So far, only 43 local entrepreneurs have been approved for 504 loans in 2023. That’s just 0.7 percent of all 504 loan approvals. 486 local business owners have been approved for approximately $238,000,000 in 7(a) loans. This represents only 0.8% of all 7(a) approvals and 0.9% of 7(a) dollars distributed.
However, there is one positive note worth mentioning. While that’s a small share, it’s an improvement over 379 7(a) approvals, which saw local business owners make just over $192,000,000 in 2022.
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Looking further into the SBA’s credit report, there are differences in SBA financing for minorities and women.
In 2022, white business owners received 60.4 percent of 504 loan approvals, while Native American and Alaska Native business owners received only 0.7 percent. 63.8 percent of the 504 loan approvals were received by male business owners and 36.2 percent by female entrepreneurs. Data for 7(a) loans show similar trends.
Why is it harder for locally owned businesses to get financing?
A number of economic and socioeconomic factors influence Native American business development, according to a 2021 report from the U.S. Department of Commerce and the Minority Business Development Agency focusing on business development on tribal reservations.
In many cases, tribal reservations face the same economic disadvantages faced by rural or remote areas in the United States. Access to the Internet, foreign capital, skilled labor and the labor market influence the development of local American businesses.
The report also states that education level, computer and internet access are key factors for economic and business development. The study concludes that only when policies covering these areas are created or self-governance occurs will it become easier for local entrepreneurs to succeed and access the resources and opportunities typically available to non-minority business owners.
Additionally, a 2010 MBDA report found that minority-owned businesses lack access to financial, human and social capital. They note that minority-owned businesses often pay higher interest rates on loans and are more likely to be turned down for loans and business loans. It also states that many minority-owned businesses are less likely to apply for funding because they fear rejection.
The Federal Reserve’s 2023 Report on Startups Owned by People of Color also found that while startups owned by people of color aim to scale and grow, they are typically less likely to receive funding or be fully approved than white-owned startups. , is critical for a new business.
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If you’re looking for financing options for local and minority-owned businesses, check out our guide to the best minority business loans.
Resources available to local businesses
Although financing is more difficult to obtain, there are special resources for local entrepreneurs. If you are a Native American, Alaska Native, Native Hawaiian, or other Pacific Islander business owner, you may be eligible for a wide variety of grants for minority-owned businesses.
Additionally, there are some local-based programs you can explore, including:
If you are thinking of starting your own business as a local, you can benefit from the Indian Business Incubator Program (IBIP).
SCORE also offers workshops, courses and support for small businesses with a mission to emphasize diversity, equity and inclusion.
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The U.S. government recently provided more funding to Tribal small businesses because of an estimated 40 percent decline in Native American-owned businesses following the COVID-19 pandemic.
In addition, the SBA adopted rule changes, expanding the lenders eligible for SBA loans—making loans more widely available to underserved communities—and allowing Community Advantage lenders to continue serving minority communities permanently.
How to support locally owned businesses
If you’re wondering how these small business owner statistics can help increase the number of local businesses across the country, you can take action.
First, as a consumer, your dollar can go a long way. If you’re looking for a gift or something practical for your personal use, look for it from a locally owned business. To help you there, we recommend looking at summaries like the following:
In addition to purchasing goods from locally owned small businesses, you can donate to local-led nonprofits to support and uplift communities.
You can also use your voice to highlight local business owners and their companies. Tell your friends and family about them or use your social media channels to spread the word.
Bottom line
Finally, small business statistics show that local companies make up a small percentage of companies nationwide. And they receive a disproportionately small share of the funding they need to grow.
Fortunately, resources like grant programs and educational workshops can help local business owners succeed in 2023 and beyond. Ideally, if these programs function as they should, statistics will increase the number of locally owned businesses in the coming years.
Frequently asked questions
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How many Native American business owners are there?
Small business owner specific statistics are difficult to obtain because many businesses do not report how many owners are in their business. However, we know that there are more than 26,064 Indigenous-owned businesses today.
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What does minority mean in business?
For a business to be considered minority-owned, at least 51 percent of it must be owned, managed, or controlled by a person from an ethnic, sexual, or military-based minority group. So, for example, a business may be considered minority-owned if it is a sole proprietorship run by a woman, veteran, or Native American.
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What resources are available for local and minority-owned businesses?
Several resources are available to help promote local and minority-owned businesses. The Minority Business Development Agency, the US Department of Commerce, the Small Business Administration, and various other nonprofit and private organizations work to advance minority communities and small businesses. In addition to support and tools to help start a business, there are grants and minority-focused programs and projects to help local and minority-owned businesses succeed.