For LGBTQ small business owners, the struggle to find finance for business operations is tougher than the other small business owners in 2023.
The Movement Advancement Project 2022 (MAP) and the Centre for LGBTQ economic advancement and Research (CLEAR) reported on Wednesday that the rejection rate of financing is much higher among LGBTQ business owners than among non-LGBTQ owners.
They gave the report based on the Annual small business credit survey that is conducted every year by the Federal Reserve Bank. As per CLEAR data, approx. 46% of LGBTQ business owners’ financing application was rejected in 2021 and the percentage of rejection among non-LGBTQ was 35%.
Other findings of the MAP and the CLEAR on LGBTQ small businesses
After carefully scrutinizing the data of the Federal Reserve Bank, MAP, and CLEAR take out the below-mentioned findings.
- The operational and financial business challenges affect the LGBTQ small business more.
- The Covid 19 pandemic has badly affected LGBTQ businesses.
- The LGBTQ has applied frequently for pandemic relief and general loans and financing but didn’t get it.
- The LGBTQ Businesses are owned mostly by women & immigrants.
- 31% of the LGBTQ business shares are owned by the South.
- The annual revenue of LGBTQ businesses is lower than non-
- LGBTQ businesses are facing wide challenges while dealing with larger banks.
- Unequal treatment by the large banks between LGBTQ and Non-LGBTQ businesses.
What is LGBTQ Small business?
When half or much of the businesses are owned by lesbian, gay, bisexual, and transgender and have not more than 500 employees working then it is considered as LGBTQ small business by the federal reserve bank.
CLEAR President Spencer Watson on LGBTQ-owned small businesses financing issue
The president and executive director of the CLEAR, Spencer Watson said that the LGBTQ small businesses are already in their struggling phase and stand at a weaker position because they are smaller in size, younger in age, and generate less revenue than non LGBTQ.
Notwithstanding, The financial industries are not serving them properly and discriminating by treating them unequally.
As a result of all this, there is a high chance of falling behind these businesses. LGBTQ businesses are the self-help way for the overall upliftment of the LGBTQ community and it impacts their cultural and social life positively.
Watson further gave various reasons for such conditions of LGBTQ businesses which includes
- The high-interest rates on funding and unfavorable repayment terms by financing industries and banks.
- The dissolution of the small community banks.
- The strict economic condition and.
- The rigid lending standards.
Therefore, there is a need to bring financial equity for LGBTQ people which is beneficial not only for LGBTQ businesses or communities but for the entire US economy.
NFIB President Holy Wade on LGBTQ funding
The executive director of the national federation of independent business research center, Holy Wade said that the bad economic condition and the strict lending standards are not only the problem of the LGBTQ but the other small business owners are also concerned about it concerning the future of their businesses.
She raised the issues on points that are creating hindrances in the path of small business owners such as high rate of inflation, shortage of labor, disruptions of the supply chain, and health of the banking system.