A BLACK-led business organisation is urging UK banks to do more to help close the wealth gap between the black and other communities after a new report found that less than half of black entrepreneurs trust banks to have their best interests in mind.

Research from the Black Business Network, a business and network support hub, found that less than half of over 800 black entrepreneurs surveyed felt that they could trust UK banks to support them with the necessary capital to grow their businesses. 

The study, called Black, British. In Business & Proud and commissioned by Lloyds bank, provides quantitative analysis of a long-held complaint among BAME business owners about the lack of access to capital and the significant role it plays in business failure. 

It found that less than half (43%) of black business owners surveyed trust banks to have the best interests of black entrepreneurs in mind. This low level of trust has a significant impact on borrowing habits.

Self-financed

Entrepreneurs in search of funding typically turn to venture capitalists if they are tech focused, community or personal wealth. The Black Business Network found that black business owners are more likely to be self-financed (34%) than use financing from banks (13%).  

Among the key reasons for higher levels of self-financing is the strong emphasis black business owners place on working with others who support and understand their culture and lived experience. The research found that more than half (53%) of black business owners surveyed have experienced discrimination in response to their entrepreneurial efforts. 

While there are those who successfully build their businesses through self-financing the Black Business Network say that many more black entrepreneurs miss out not just on financial support but the key networks and expert advice that banks can give.

The report made a number of recommendations. Among them were for UK banks to take steps to Improve cultural awareness and black representation in banking, to partner with grass roots and local community organisations to gain trust and provide ringfenced financial support to create equity.

Shari Leigh, Founder of Black Business Network and member of the Black Business Advisory Committee said: “For the black business community these findings are nothing new. The legacy of ties to the slave industry and unaddressed structural racism remain at the forefront of conversations within the black British community.

These findings make uncomfortable reading, from which we cannot and will not shy away

Paul Gordon, Managing Director, SME and Mid Corporates, Lloyds Bank Commercial Banking

“It’s commonplace to balance the idea of want versus need when engaging with traditional financial institutions, questioning the importance of our feelings and visibility.

“It just shouldn’t be this way. We use, work for and contribute to these institutions and we should be seen and heard. This research is important because it quantifies black business communities’ unapologetic thoughts and experiences.”

Paul Gordon, Managing Director, SME and Mid Corporates, Lloyds Bank Commercial Banking acknowledged the systemic barriers that hinder black entrepreneurs and said that following the report Lloyds was committing to “large-scale change”.

“These findings make uncomfortable reading, from which we cannot and will not shy away”  Gordon said. “We’re taking steps to better understand the needs of black colleagues and customers through our Race Action Plan, and by working with our partners including the Black Business Network, Foundervine and the Black Business Advisory Committee.”

He added: “Banks have a vital role to play in creating a more diverse and inclusive business community in the UK which will benefit the country. We know we still have a long way to go, and this is not an easy fix or a matter of better signposting what we do. We are committed to large-scale change and collective action to help pave a way for black-owned businesses to thrive.”

However entrepreneurs who spoke to The Voice remained cautious. 

Kameese Davis, CEO and founder of Nylah’s Naturals, and who recently won investment on a recent edition of Dragon’s Den said: “Historically white people get working capital  to prove their concept. Black people have to prove their concept to get working capital so we’re already at a  disadvantage.” said Kameese Davis, CEO and founder of Nylah’s Naturals, who also recently won investment on a recent edition of Dragon’s Den.  “A huge barrier is that banks often don’t understand our markets and our business models. 

“Unconscious biases do come into play and I think it would be naive of us not to think that’s the case. So the fact that the report recommends ring fenced support is good because it will safeguard black entrepreneurs against those unconscious biases. 

“But it will be really interesting to see how they roll that money out and if it gets to the demographic that really needs it. Also I’d want to know will the money they’re suggesting be allocated specifically to black people, and not BAME people because this can create a further barrier for us.”

Disparity

Davis continued: “The fact that Lloyds acknowledge the problem is a good first step, I think they’re recognising the problem, because we’ve been screaming about this for ages. There is a disparity here. We’re not being able to economically compete, because we’re not getting the start-up funding.”

Nicholas Okwulu, founder of south London based social enterprise PemPeoples is far more sceptical. 

“Let’s not sit and pretend, UK banks never wanted our business” he told The Voice. “The only reason banks like Lloyds are looking at this issue is because they’re seeing lots of young black entrepreneurs who are setting up successful businesses but are not opening up accounts with any of the high street banks. 

Awareness

“I think among black business owners, there’s a higher level of trust towards online banks. They seem more open and understanding to what we’re trying to achieve. I have many friends who run small businesses and I don’t know any of them who have a business account with one of the big UK high street banks.”

Alisdair Soyode, founder of BEN TV, the first ethnic satellite TV station in Europe, welcomed the report’s emphasis of improving the cultural awareness of bank managers who work with black business owners. 

“I have a number of friends in the manufacturing sector who were not able to get funding because their primary markets are in the Caribbean or Africa. What the banks often don’t understand is that once a particular product becomes popular in these regions and other places, black customers in the UK start buying them as well. So there’s every chance that banks will get their money back.”

The Black, British. In Business & Proud report comes at a time of increased focus on black led businesses and consumers. Last year a report from the Federation of Small Businesses (FSB) and Aston University’s Centre for Research in Ethnic Minority Entrepreneurship (CREME) found that businesses run by entrepreneurs from black and minority ethnic (BAME) backgrounds contribute as much as £25 billion to the UK economy.

However the research also found that they were still being held back by barriers that hindered their growth including access to external finance.