Many small business owners have struggled in navigating the COVID-19 crisis in the United States, and black-owned businesses have had significantly more difficulty. A report from two members of the New York Federal Reserve have shown that black-owned businesses have fared notably worse throughout the pandemic compared to white-owned businesses.
The study found that the number of businesses fell by approximately 22% between February and April 2019, but there was a striking disparity when examining statistics among racial ownership. While white-owned businesses fell by 17%, Latino-owned businesses fell by 32%, and black-owned businesses fell by 41%.
In addition, the financial health of black-owned businesses has contributed to this decline. According to the report:
- Black-owned businesses are more likely to be in hot spots for COVID-19 compared to white-owned businesses.
- Loans available through the PPP (Paycheck Protection Program) only reached approximately 20% of eligible businesses in areas with high densities of black-owned businesses.
- Black-owned businesses have had less cushion during the pandemic.
However, when the PPP program ended, there was more than $130 million available. This suggests that many black-owned businesses had the opportunity to apply for assistance, but did not do it. Some speculations as to why black-owned businesses did not access these funds include:
- Uncertainty about the ability to repay the loan if it were not forgiven
- Previous rejection of loan applications creating uncertainty about getting approval
- Lacking strong banking relationships leading to intimidation when applying
The report recommends that future business-relief efforts for COVID-19 focus on areas hit the hardest from a geographic perspective. This will more effectively target black- and other minority-owned businesses, allowing them to receive financing that can help them get through this difficult time. If not, the nation risks losing thousands of non-white businesses before the pandemic is over, which will have a real and serious impact on the country’s economy.