By: Barry Howard
From the early twentieth century, with such vibrant economic enclaves like Tulsa’s Greenwood district or “Black Wall Street”, Black entrepreneurship has been in no short supply. However, this entrepreneurial spirit has been stymied by systemic disinvestment, red-lining, and predatory lending, among many other vices of racial prejudice. Black business owners have become fewer in size and vitality. We are here to investigate why that is. But before we start, we must know our history.
to know the past is to control the future
The nation’s first, government-subsidized, bank serving formerly enslaved African-Americans was the Freedmen’s Savings Bank, established in 1865. Despite a rather notable rise, the Freedmen’s Savings Bank was bankrupted in under a decade, partly due to issues regarding the investments of its managers. Quite long after, other banks sprung up–––though this time, Black owned. The first of them: the True Reformers Bank, chartered in March of 1888. From this period into the early twentieth century, black businesses began to boom. According to reports from the National Negro Business League, the period between 1900-1930 saw the most vigorous uptick of black-owned business and trade––with its biggest leap from 20,000 businesses in 1900 to 40,000 in 1914¬¬––an increase of one-hundred percent, making it the “Golden Era of Black Business”, according to historian, Juliet Walker. Black barbers, shoemakers, merchants, dressmakers, undertakers, and restaurateurs were ironically thriving under the enmity of Jim Crow. However, as the paradox suggests, as society began to integrate, the black dollar began to depreciate. Some cite the increasing industrialization of America’s urban centers as the source of this shift.
Through this Post-Depression “New Deal” period blacks were locked out of opportunities to acquire capital to either salvage or sew new seeds of economic growth. Much to our collective shame, these practices continually subsist. Studies indicate that black entrepreneurs receive disproportionately less venture or “start-up” capital than their white counterparts. This trend may be due, also, to financial illiteracy, distrust of financial institutions, and overall lack of notable representation. There is a laundry list of reasons why things are not as they should be. But, what if I told you how better things could become? Banking Black. If black bank account-holders were to re-collateralize their assets with Black-owned banks, this could yield far greater dividends. According to data from the 2021 Home Mortgage Disclosure Act, 15.3% of black Americans were denied mortgages, compared to 6.3% for non-Hispanic white Americans. This is consistent with Black-owned banks comprising less than 1% of all U.S. Banking Systems and only 7.53% of credit unions. Discrimination in lending has been a long practice. Despite similar creditworthiness, Blacks often are rejected access to loans at well over twice the rate than whites.
Alternatively, Black-owned banks have provided mortgages, loans and accounts to those who would otherwise have no services. However, despite black-owned banks service to a majority minority clientele, they are still dwarfed by the overwhelming mass of mainstream lending institutions like–––Bank of America, Citi, Wells-Fargo and JP Morgan Chase. The “Big Four” or, the largest transnational banking institutions in the world, have the most sordid histories of discriminatory practices. From the days of the Antebellum era, institutions like Wells Fargo, mortgaged enslaved Africans as collateral for loans advanced to insolvent southern planters. This legacy has marred the reputation of these institutions.
the way forward
The appropriate financial response to these historic and present day abuses would be an exodus of aspiring black business-owners to more localized, community banks. This will relieve tens of thousands of black barbers, beauticians, nail-techs, fashion designers, and retailers who’ve had to beg their families, churches and communities to do what essentially is the job of a bank or lending institution. This practice underscores the increasing deficit of underbanked and underserved black communities. Big Banks have the benefit of government and private subsidies that have allowed them to endure beyond many devastating financial crises. Black banks have not similarly had this luxury. In fact, the total number of Black-owned banks has steadily decreased since the turn of the last century. With 48 federally recognized black banks existing in 2001 being shrunk to only 20 banks, as of September of 2022. Lest we forget, there are over 4,000 banks insured by the Federal Deposit Insurance Corp, or FDIC. However, despite this discouraging shortfall, there are black-owned banks currently existing¬¬–––the largest being City First Bank in Washington, D.C.––and other non-federally recognized, Black owned “Fintech” banks that are increasingly gaining popularity in the minority-focused banking sector.
if at first you don’t succeed…dust yourself off and withdraw your deposit account
However, the reality remains that most black Americans are not “banking black.” With such creative solutions like Church/community credit unions and even credit unions for members of intercollegiate, social fraternities and sororities, the black entrepreneur may have a path forward. Beyond this, it is incumbent on the aspiring entrepreneur to understand corporate housekeeping and business formation. Many organizations may elect to classify themselves as not-for-profit or B-corps, which may insulate them from some tax liability. This information can be found in your local Department of State. Sifting through the minutiae of these documents can prove burdensome to the untrained eye. The National (negro) Bar Association (NBA) could establish a network of black business attorneys, tax associates, and financial analysts to demystify the jargon and ease the transition of business formation. This is sure to stimulate the black economy and return the black dollar to the black community.
Despite companies such as Netflix and PayPal pledging millions into Black-led financial institutions ,which although noble, accounts for only 2% of their cash-holdings. There must be a greater sense of societal urgency to move the black dollar forward. The banking public need also be disabused of the misconception that Black-owned banks only lend to minorities. If the multiple diversity, equity and inclusion branches of large corporate conglomerates were incentivized to invest low-cost, low-interest business loans with Black banks and businesses, we may expect to see a steady increase in black business owners acquiring start-up capital. This will restore communal trust in black businesses. From then on, black economic success is almost sure to follow. But until we begin to think black, we cannot bank black.
This post has been reproduced and updated with the author’s permission. It can be found here.
Barry Howard recently graduated from Penn State Dickinson Law in Carlisle, Pennsylvania. He is originally from Jackson, Mississippi and received his undergraduate degree from Tuskegee University.
Sources:
https://www.bankrate.com/banking/how-to-support-black-owned-banks/
https://www.forbes.com/advisor/banking/black-owned-banks/
https://www.nerdwallet.com/article/banking/black-owned-banks-and-credit-unions
You hired a business attorney to represent your startup. Nice work! Legal counsel can ensure your business doesn’t run into any trouble during takeoff. But what kind of advice can your attorney give? Can he/she help you with personal matters too? What obligations does your attorney have to you?
In short, yes. The company’s attorney is obliged to serve the best interests of the company, but he or she may also serve on the company’s board and offer business advice. However, this can pose some issues. If there is a conflict between the attorney’s ethical duties and their fiduciary duties as a board member (yes, board members have such duties too), this creates a major conflict of interests issue.
Joseph Crowley recently graduated Penn State Dickinson Law in Carlisle, Pennsylvania. He is originally from Fort Collins, Colorado and received his undergraduate degree from Colorado State University. He is interested in all aspects of business and tax law. He can contacted via email at 
In 2022, the 
Walt Disney once said that the “way to get started is to quit talking and begin doing.” It seems the Federal Trade Commission (FTC) was listening. The FTC finally quit talking about banning non-competes and began doing it on April 23, 2024.
The FTC recently issued a 
Several legal challenges to the final rule are expected before the rule’s effective date, with two legal challenges already being filed in court. Parties are seeking injunctive relief against the rule, which if granted, would prevent the FTC’s final rule from becoming effective and enforceable until litigation commences. Legal arguments are likely to center around two central themes: 1) the constitutionality of the final rule itself and 2) whether the FTC has the legal authority to issue such a rule. The opposition’s goal with legal challenge is to delay the effective date of the rule, limit the final rule’s scope, and/or to have the rule eliminated completely.
The first thing that business owners should do is closely monitor the news for further developments, especially court rulings. The current form of the rule could be upheld, limited in scope, readapted, or struck down completely. Business owners should pay close attention to how any of these potential outcomes might change business compliance requirements. Legal counsel can also assist businesses is achieving compliance under the final rule.
Businesses worried about protecting confidential information can enter into non-disclosure agreements or may be protected by trade secret laws. Non-disclosure agreements create a confidential relationship that would prohibit disclosure of sensitive information by parties to the agreement. Trade secret laws create civil and criminal penalties for the “misappropriation” of trade secrets.
Businesses worried about preventing their customers, clients, or employees from being poached by former employees can enter into non-solicitation agreements. These agreements prevent a current employee from soliciting the above-mentioned parties after leaving the company.
Avoid Facial Discrimination
Savannah Parsons, at the time of this post, is a Penn State Dickinson Law graduate. She is originally from Bath, New York, and graduated from Troy University. Savannah is interested in family and disability law.
Startups that do not utilize Non-Disclosure Agreements (“NDA”) are at higher risk for financial instability or failure. Even if an entrepreneur feels that they can trust others, utilizing NDAs is one of the easiest yet most effective ways to protect a business.
NDAs protect confidential information including, but not limited to – trade secrets, client information, marketing strategies, proprietary processes, coding techniques, and other sensitive information. NDAs give business owners the power to decide what information is confidential and protected. With this power, business owners can establish employee expectations regarding what information is protected and the consequences of violations.
The utilization and enforcement of NDAs are particularly helpful for setting employee expectations and legally binding employees and third parties to abide by the agreement. However, an NDA’s effectiveness within a business is never guaranteed, as employees and third parties may choose to violate the NDA. Luckily, NDAs provide fairly easy legal recourse when a breach occurs.
Even if an NDA appears enforceable, a court may find it is not. This finding may occur when the NDA includes broad language, information that is not confidential, or something illegal. To mitigate these issues, language and word choice should be extremely precise and specify what information is considered confidential under the agreement. Further, if the information stated within the agreement has been widely disclosed or is public knowledge, it is extremely unlikely that a court will uphold the NDA. Lastly, NDAs cannot force employees to engage in illegal conduct, such as legally forcing them to withhold reports of something they are required to report by law.
Madeleine is a 3L at Penn State Dickinson Law pursuing a joint JD/MBA degree. Madeleine studied International Business and Management at Dickinson College for her undergraduate education. Before attending law school, Madeleine worked as a Claim Manager at a 9/11 Victim Compensation law firm in NYC. Madeleine is interested in pursuing a career in business and/or healthcare law.
