Houston's Black-owned businesses face financing barriers

The doors of opportunity remain locked for too many small-business owners.

A new LendingTree analysis reveals that Black-owned businesses faced the highest rejection rate for financing in 2024, with 39% of them denied loans, lines of credit or merchant cash advances. Hispanic-owned businesses followed at 29%, compared with just 18% of white-owned businesses.

Nationally, one in five businesses overall — 21% — were denied financing last year, nearly unchanged from 2023. But beneath the surface of that flat figure lies a stark disparity: Capital flows more easily to white-owned companies, while Black and Hispanic entrepreneurs carry the heaviest burden of rejection.

Houston’s uneven playing field

LendingTree says 39% of Black-owned businesses were denied financing. Credit: Adobe Stock

The numbers hit especially hard in Houston, one of the most diverse and entrepreneurial cities in the country. According to the Greater Houston Black Chamber of Commerce, the region is home to more than 120,000 Black-owned businesses — the fifth-largest concentration in the nation. Yet local surveys show those firms face unique barriers to accessing capital.

A 2023 Houston Small Business Ecosystem Report found that minority-owned companies in the metro area are twice as likely as their white counterparts to rely on personal savings or credit cards to fund operations. Many report being denied loans even when they present strong business plans and customer bases.

“Standards for lending to consumers and businesses have generally been tight for some time, and that’s unlikely to change soon.”
Matt Schultz, LendingTree

“Houston has one of the most vibrant Black entrepreneurial communities in America, but too many of our businesses remain undercapitalized,” said National Association of Real Estate Brokers President Courtney Johnson Rose. “When financing doesn’t flow equitably, it limits growth, job creation and the ability of our neighborhoods to thrive.”

Who gets denied

The LendingTree study found that the size and age of a business also play a role. Firms with just one to four employees were denied 26% of the time — five times the rate of larger firms. Startups fared poorly, but even businesses with three to five years of experience faced the highest denial rate at 29%.

By loan type, SBA loans and lines of credit were the most difficult to secure, with nearly half — 45% — being rejected. That hits Houston’s small firms particularly hard, given the city’s reliance on SBA-backed programs during the pandemic recovery.

Community development financial institutions, often praised as a lifeline for underserved entrepreneurs, turned down applicants 34% of the time. Large banks followed at 31%.

An unsteady economy

The reasons mirror a turbulent economy. High interest rates, inflation and an unsteady job market have made lenders more cautious.

“Inflation, tariffs, high interest rates and a slow job market are making things tough on small businesses and the customers they’re trying to attract,” said Matt Schulz, LendingTree’s chief consumer finance analyst. “With this uncertainty, banks pull back — as they tend to do in risky, unpredictable times. Standards for lending to consumers and businesses have generally been tight for some time, and that’s unlikely to change soon.”

Local impact

In Houston, where minority-owned businesses contribute billions to the regional economy, the impact is felt daily. Black entrepreneurs run a wide range of businesses, from restaurants and retail shops to logistics companies and tech startups. Yet without access to affordable capital, many find themselves unable to expand, hire, or even stay afloat.

Advocates are calling for solutions that include expanded microloan programs, targeted federal aid and stronger partnerships between local banks and community organizations.

“Financing isn’t just about one business owner,” Rose said. “It’s about the employees they hire, the neighborhoods they serve, and the economic future of Houston. If we don’t solve this gap, we all lose.”