Small business owners face many challenges on their entrepreneurial journeys. However, small business funding barriers remain one of the biggest obstacles to long-term growth. Access to capital and credit-building opportunities are essential—yet these resources are often gate-kept. In this guide, we break down the 3 critical barriers of circumstance, systems, and social bias that impact minority and women entrepreneurs.
Quick Summary: The 3 Main Small Business Funding Barriers
| Barrier Type | Key Obstacle | Impact on Entrepreneurs |
| Circumstance | Lack of access to networks and information. | Forces owners to work harder just to get to the “starting point.” |
| Systems | Biased financial and educational structures. | Minority and women-owned firms receive statistically less funding. |
| Persons | Social bias and the “myth of meritocracy.” | Individual gatekeepers use “exceptions” to ignore systemic flaws. |
The Privilege Wall: Systemic Small Business Funding Barriers
Before we look at the “reasons behind the reasons,” the data tells a clear story of the small business funding barriers that exist today:
-
Minority-Owned Businesses: Currently generate over $1.8 trillion in annual revenue, proving their immense economic value despite being gated off from essential capital.
-
Women-Owned Businesses: There are now over 12 million women-owned firms in the U.S. generating $1.8 trillion, yet they are statistically approved for $5,000 less in funding than male-owned businesses—even with higher success rates.
The Privilege Wall: Systemic Small Business Funding Barriers
There are times when people are so busy looking up that they don’t pay attention to what’s happening in any other direction. Some people, due to circumstances and systems that are historically and endemically in their favor, often think their easy journey to success – full of opportunities with few headwinds – is the same for everyone. If other people are not as successful as they are, then it must be because those other people did something wrong, or are just plain lazy. This can cause entire demographics to get painted with a very large brush, instead of looking for the “reasons behind the reasons.”
Minority business owners, for instance, are statistically successful, generating over $1.8 trillion annually. However, racist notions that have existed for centuries have carried over into systems—such as education and finance—to gate off minority business owners from getting the information and capital they need.
There are times when people are so busy looking up that they don’t pay attention to what’s happening in any other direction. Some people think their easy journey to success is the same for everyone due to historically favorable systems.
If others aren’t as successful, they assume it’s because those people did something wrong or are just plain lazy. This leads to entire demographics being painted with a large brush instead of looking for the “reasons behind the reasons.”
Minority business owners are statistically successful, generating over $1.8 trillion annually. However, historical notions have carried over into finance systems to gate off these owners from the capital they need to grow.
Similarly, the 12 million women-owned businesses in the U.S. generate upwards of $1.8 trillion. Yet, they are statistically approved for at least $5,000 less in funding than their male counterparts—even though male-owned businesses have a lower success rate.
The reluctance to open doors for underserved groups only perpetuates the cycle. Women and minorities are forced to work harder to maintain their operations. These businesses succeed in spite of the system, not because of it.
The Flaw in the System
We may meet bullies who tell us to work harder or point to exceptions to claim the system is fair. In truth, these exceptions only prove how flawed the basic systems of information really are.
A person in an economically depressed area with a great idea is often unable to get funding compared to someone in an affluent area. The latter can simply go online, make a few clicks, and network with lenders.
This leads to a larger discussion on why basic systems are not level for women and minority business owners. We must ask why accessibility to opportunity is consistently placed out of reach for some while others thrive effortlessly.
Overcoming Small Business Funding Barriers with Nanaki Capital
At Nanaki Capital, we offer financing solutions to minority and women entrepreneurs. We believe opportunity should not be unreachable due to race, gender, or circumstance. Contact us today and we will listen to understand your business financing needs, so we can help you reach your goals while minimizing obstacles.
