It’s not an easy time to be a small business in search of financing. For LGBTQ owners, the struggle has been even harder.
LGBTQ-owned businesses reported more rejections than non-LGBTQ businesses that applied for funding, according to a 2022 report from Movement Advancement Project, a nonprofit think tank that focuses on equality and opportunity, and the Center for LGBTQ Economic Advancement & Research (CLEAR).
With the tightening of lending standards, they could be at even more risk of falling behind, said Spencer Watson, president and executive director of CLEAR.
“The tighter economic conditions, the higher interest rates, the collapse of these smaller community banks and the resulting constriction of lending is certainly more detrimental for the LGBTQ community than non-LGBTQ community,” Watson said.
Concerns about the economy and lending conditions aren’t only on the minds of LGTBQ entrepreneurs. Overall, small business owners are skeptical about their future business conditions, said Holly Wade, executive director of the National Federation of Independent Business’ Research.
“The small business economy is being hindered by inflation, supply chain disruptions, and labor shortages,” she said. “While financing isn’t a top problem for small businesses, owners have expressed concerns about the health of the banking system for their business purposes in light of the banking turbulence in March.”
Yet, data show that when it comes to financing, LGTBQ small business owners are being left behind. In 2021, 46% of LGBTQ-owned businesses said they didn’t receive any of the financing they had applied to in 2021, according to the MAP/CLEAR report. In comparison, 35% of non-LGBTQ businesses that applied for funding were rejected, the report found. Much of the funding sought was through the Covid relief programs offered, Watson said.
“Those businesses were frequently smaller in size and they were also frequently younger and they had smaller revenues,” Watson explained. “They were struggling with those additional pressures because they were already in a weaker financial position to start with.”
Watson said there are similar themes emerging in the analysis of the 2022 Federal Reserve’s small business credit survey, which hasn’t been fully released yet.
While LGBTQ small business owners are very optimistic, they are also still more likely to report more kinds of financial challenges than non-LGBTQ businesses. Some six in 10 reported difficulties affording operating expenses over the last year, according to Watson, who prefers a gender-neutral pronoun. Most of the businesses are owned by people who identify as LGBTQ but their businesses aren’t necessarily oriented towards or servicing the LGBTQ community, they said.