Small business owners of color continue to face challenges
A national Small Business Majority survey reveals the ongoing challenges facing minority small business owners during the COVID-19 pandemic. The survey highlights the current disproportionate impact of the pandemic on small businesses owned by people of color that already face systemic barriers to accessing finance and business resources.
Despite efforts by states and the federal government to provide emergency financing for small businesses, the study found that they continued to experience significant revenue losses. Because of these revenue gaps, many businesses have had to make tough decisions to stay afloat. About a third of minority-owned businesses (32%) had to reduce their employees’ working hours, and almost a quarter (24%) temporarily closed their doors. Of those who downsized at the height of the crisis last year, 60% have not restored their workforce to pre-pandemic levels.
The study also found that small business owners of color are more likely to need to take drastic action to stay afloat. Nearly one in four entrepreneurs of color (Black, Latino, Asian and Pacific Island American business owners) could permanently lay off employees in the next few months, compared to 14% of white business owners. The survey also found that 18% of black and Latino business owners say they are likely to shut down their business for good, compared to 14% of white small business owners.
While many small businesses have been able to access federal assistance, some small business owners have struggled to navigate funding programs in the past year. The SBA issued a PPP loan activity report on Jan. 24, which unveiled the percentages of loans given to business owners who were White (65%), Hispanic (14%), Asian (12%), African-American (8%) and Native American or Native of the ‘Alaska (2%), although the overwhelming majority did not declare their ethnicity
According to the Small Business Majority study, of those who applied for the Paycheck Protection Program (PPP), 57% said the application process was difficult, and only 33% received the full loan amount they requested. Minority-owned businesses were less likely to receive the full amount requested (27% Latino, 23% Black, and 23% AAPI).
“Applying for federal aid programs has been incredibly complicated from the start, especially for small minority and female-owned businesses,” said Rochelle Smith, owner of Eliteess Beauty in Cypress, Texas. “Small businesses like mine should have a fair chance to apply for these programs. If my business is turned down for this second round of PPP, I don’t know how I’m going to keep my business alive as the pandemic continues to drag on. “
The coming weeks will prove to be even more difficult as small business owners plan to make further cuts, and more entrepreneurs of color may temporarily shut down their businesses in the next three months (32% of Latino , 29% Black and 25% AAPI, compared to 21% of their white counterparts). The vast majority of small business owners (80%) support direct federal aid in the form of grants, which was offered in President Biden’s economic relief plan.
Businesses owned by blacks and other minorities have closed faster than businesses owned by whites as a direct result of the lack of stimulus funds. Based on an August 2020 report Federal Reserve Bank of New York report, nearly half of black-owned businesses had been wiped out by the end of April, and black businesses experienced the sharpest decline, dropping 41%. Latinx business owners fell 32% and Asian business owners fell 26%. In contrast, the number of white business owners fell by 17%.
The Fed found that black-owned businesses were less likely to enter the pandemic from a strong financial position than white-owned businesses, with smaller shares of black businesses operating at a profit, having a high credit rating and using retained earnings to finance business. Only 42% met at least two of these criteria, compared to 73% of white business owners.
“As the results of this survey make clear, small businesses urgently need Congress to work with the Biden administration to pass a comprehensive federal aid plan that will put small businesses on a meaningful path to recovery,” said John Arensmeyer, founder and CEO of Small Business Majority. , a national small business organization that empowers diverse entrepreneurs to build a thriving and inclusive economy. “While temporary solutions to provide emergency financing have provided an important lifeline for small businesses, they need bold action to help them get through the difficult months ahead. ”
Fortunately for minority-owned businesses, the Biden administration has made their aid a priority.
“Our priority will be small businesses owned by Blacks, Latinos, Asians and Native Americans, businesses owned by women, and finally having equal access to the resources needed to reopen and rebuild,” then president-elect Biden said January 10, 2021.
After taking office last week, Biden announced a $ 1.9 trillion plan this would include flexible grants to help struggling small businesses.
During the election campaign, Biden pledged to provide access to capital to small minority-owned businesses and supported him by allowing CDFIs, which help businesses in disadvantaged areas, quick access to the latest round of PPP loans. The program open to all PPP lenders approved next week.
Thus, we have already seen Biden’s emphasis on helping businesses owned by blacks and other minorities. These actions are justified. According to Associated press, “Thousands of small minority-owned businesses were at the end of the government’s initial coronavirus relief program.” The AP found that many struggled to find banks that would accept their requests or were disadvantaged by the terms of the program. The AP analyzed data from the Paycheck Protection Program released on December 1, which showed that many minority-owned business owners had not received P3 funding until the final weeks of the program, while many other white business owners had obtained loans much earlier.