The participation of non-whites in the entrepreneurial structure of Canadian society is a complex issue. To understand the contribution of these entrepreneurs to the business world as well as some of the problems they face, many factors must be examined. This article deals with only a small part of the matter. It looks at some aspects of business operation that are often problematic for small or medium sized enterprises in general, and compares the situations of non-white and white business proprietors. The intent is to draw attention to problems common to all entrepreneurs and to those that seem specific to non-white businessmen.
The data presented in the following discussion are drawn from interviews conducted in February, 1982 with 49 Black, Chinese, East Asian and Japanese entrepreneurs and 12 white business proprietors of British or European origins(1). All entrepreneurs surveyed were well established proprietors of small or medium sized firms in a variety of sectors including manufacturing, importing/exporting, retailing and service. This is a very small sample of Metropolitan Toronto and it is important to keep in mind that the findings are not generalizable beyond the experiences of those interviewed. Rather, the findings suggest areas for future, more detailed examination.
Obtaining financing to establish, maintain and expand is a perpetual problem for small business in general. A recent study of chartered bank financing of small business in Canada finds that while there is no systematic bias against smaller enterprises, banks do charge more for loans to small business than to big business and also require more collateral. including personal collateral (Wynant, Hatch amd Grant, 1982). Current poor economic conditions aggravate this situation. Thus although the entrepreneurs surveyed had not had difficulties obtaining business capital it should be kept in mind that businessmen starting up today may experience financial problems regardless of their minority status.
For those surveyed, access to commercial capital was not an issue. Almost all (94 %) who had made loan applications were successful in receiving the needed funding. Rather, the problems were located in the process of obtaining that capital. None of the white proprietors felt their applications had been subjected to any special or inequitable treatment. In comparison, 27% (or 10 out of 37) of non-white entrepreneurs felt their applications were scrutinized more closely and 29% felt they were required to provide more collateral than someone from a different ethnic group for a similar venture.
The use of the many government assistance programmes geared to the promotion and encouragement of independent enterprise can be a supplementary way of handling financial difficulties(2). However, among those interviewed, both familiarity with and use of such programmes were low. Although non-white proprietors reported slightly less knowledge about these programmes than the other respondants, they did use them to the same limited extent as white entrepreneurs.
Problems with suppliers, employees, customers and expanding the market
Developing and maintaining an organization that includes relations with all employees; acquiring efficient equipment and supplies; and, developing a market are three of six main aspects of business activity defined by Cole (1967:399) (3). These items highlight how critical relationships with suppliers, employees and customers are for successful enterprise. In the survey, respondents were asked to assess problems in these areas as "common to all business", "a matter of race", or "not a problem". As the table illustrates, there is little evidence of racial disadvantage. Most saw problems with suppliers, employees, customers and expanding the market as common to all businesses. The majority felt that diffculties in finding suppliers, getting reliable suppliers or negotiating good credit or prices with suppliers, were common to all businesses. The next most common response was that such matters were not at all a problem for their particular businesses. Difficulties finding enough employees (especially qualified ones) or poor employee relations were also matters which most felt were common to all businesses. For a sizeable number of non-white respondents, staffing problems were not at all important. It was common for family members to be employed in these firms and this may be a partial explanation for good employee relations.
Lack of customers and difficulties expanding the market were also generally seen as common to all businesses and, as many commented especially in the present bad economy. About half of the businesses surveyed had some ethnic connection in that they either provided speciaity goods and/or services, or served a predominantly ethnic clientele. While space does not permit an elaboration of this important ethnic connection, it is also possible that it is more difficult for such busi nesses to expand beyond the ethnic market in to the wider society.
Slightly over half of both non-white and other respondents were active in non-ethnic business or professional associations such as the Canadian Manufacturing Association, the Canadian Restaurant and Hotel Association or local associations of merchants. The use of these organizations suggests one of the strategies employed to enhance business operations. These associations were used primarily to get information on specific items (government regulations, legal matters, etc.), to get information about the general climate for business, and to secure more customers. Volunteered comments about participation in such organizations tended to be positive and stressed the usefulness of up-to-date information as well as the social aspects of membership. However, these advantages were enjoyed only by slightly over half of the respondents.
Summary and Recommendations
For those interviewed, access to commercial capital was not a particularly serious problem although the process of obtaining business loans was perceived as inequitous by some non-white entrepreneurs. Most found that problems with financing, suppliers, employees, customers and expanding the market were common to all businesses rather than related to racial disadvantage. There were few differences between non-white and white business proprietors.
It is encouraging to note that the racial element is small in the perceptions and experience of these respondents. All are successful businessmen; they are managing to operate a business during difficult economic times; their ambitions for independence are being met; and, their day to day concerns are focussed on matters of business competition, making deals and securing profits. Why few non-whites appear to go into business; how many have failed and why; and whether minority run businesses tend to be concentrated in less profitible commercial sectors may be questions where racial disadvantage provides an answer. But, for the non-white entrepreneurs interviewed, there is little evidence of disadvantage. Rather, their experiences counter the notions that non-white entrepreneurs lack business sense, are concentrated only in specific endeavours or lack financial success in the Canadian business environment.
While the racial element is not very apparent in business concerns, it does affect some proprietors at least to the point of perceived financial disadvantage. Higher collateral and more careful scrutiny are normal procedures in funding certain kinds of business ventures (high risk propositions, small businesses, etc.). Yet none of the white respondents reported such experiences and about one quarter of the non-white respondents did. Future research might usefully focus on bank managers methods of assessing applications. Developing an accurate understanding of the requirements and procedures for business financing might better sensitize minority applicants to what is procedural and what is inequilous.
It is clear that there are problems for business, especially in the present economical context, and these issues must be controlled by minority entrepreneurs as well as others. Few suggestions for improving the business operations of non-white proprietors are obvious from the findings reported in this article. Participation in business and professional organizations outside the ethnic community appears to give access to useful business information. Non-participants might consider getting involved in such organizations. Although getting information about government assistance programmes and the process of applying such assistance seem to be time-consuming and frustrating processes, more attention might be given to such opportunities. In turn, government agencies might usefully consider how to improve dissemination of information about programmes and requirements, including how to access possible government contracts. Some efforts could also be usefully directed towards providing immigrants with information about other business opportunities and support services so that reliance on an exclusively ethnic network could be reduced.
Dr. Darla Rhyne is with the Institute for Behavioural Research, York University.
1. For more information about this study contact the Race Relations Division, Ontario Human Rights Commission, 400 University Avenue, Toronto, Ontario, M7A 1T7.
2. The A.B.C. Directory for Business (1981-82) lists over thirty such progrmmes In the areas of financing, taxation relief manpower assistance. Management improvement and other activities.
3. The other aspects of business activity defined by Cole include: the determination of business objectives and changing them as conditions require: securing adequate financial resources and retaining them while nurturing good relatons with present and future investors; and keeping good relations with the public authorities and society at large.
1982 ''The Entrepreneurs." Pp. 399-400 in C. Walton and R. Eels, Eds., The Business System - Readings. Volume 1. New York: Macmillan & Co.
Ministry of State for Economic Development
1981 A.B.C. Assistance to Buisness in Canada. 1981-82. Ottowa: Minister of Supply and Services Canada.
1982 Visible Minority Business in Metropolitan Toronto: An Exploratory Analysis. Toronto: Race Relations Division Ontario, Human Rights Commission.
Wyant Larry Jim Hatch & Mary Jane Grant
1982 Chartered Bank financing of Small Buisness in Canada. London, Ontario: School of Buisness Administration, University of Western Ontario.