The coronavirus pandemic will shutter many small businesses. And early evidence shows it is disproportionately hurting black-owned small businesses.
More than 40 percent of black business owners reported they weren’t working in April, when businesses were feeling the worst of the pandemic’s economic consequences. Only 17 percent of white small business owners said the same, according to an analysis of government data by Robert Fairlie of the University of California, Santa Cruz.
A higher share of black business owners stopped working during lockdowns
Change in active small business owners between February and April 2020
Many small businesses are struggling during the pandemic because they lack easy access to loans and cannot easily move their businesses online. Black-owned businesses tend to have fewer employees than other small businesses. They are also more likely to be in industries like restaurants or retail that lockdowns have hit especially hard, said Ken Harris, president of the National Business League, an organization founded by Booker T.
Washington in 1900.
“Most lack the capacity, scale and technical assistance needed to survive a pandemic,” Mr. Harris said.
Black-owned businesses also appear to be benefiting less from federal stimulus programs. Only 12 percent of black and Hispanic business owners polled between April 30 and May 12 received the funding they had requested. About one quarter received some funding. By contrast, half of all small businesses reported receiving from a single part of the stimulus packages — the Paycheck Protection Program — according to a census survey.
“Black businesses often don’t have a traditional banking partner,”
Mr. Harris said. Without such a partner, many had trouble applying for assistance. The disproportionate struggles facing black small business owners come as their communities are already bearing the brunt of public health crises: Black people are more than twice as likely as other Americans to die of the coronavirus and much more likely to be victims of police violence.
Juliet Anderson owns two businesses, a salon and a children’s party place, on the same block in the Bronx. Both have been closed for three months, she said, and neither has received financial assistance. Bills are piling up.
“It’s been a consistent rollercoaster trying to get help,” Ms. Anderson said. “As far as I know, most of the people that are in our area have gotten nothing or the bare minimum, and they’re still waiting. It’s a heightened frustration. We don’t know if we’re even going to be able to make it.”
Only 2 percent of a $20 million city-wide small business loan program went to businesses in the Bronx, the New York City borough with the highest share of black people, according to a spokesperson for the city’s Department of Small Business Services, while 57 percent went to Manhattan businesses.
The agency’s commissioner, Jonnel Doris, said in a statement, “This is an unprecedented time that calls for creative solutions, and we will continue to do everything we can to help each small business owner who needs it to get back on their feet.”
Small businesses in majority black and Hispanic neighborhoods may run out of cash faster
“It’s unfortunate that the businesses that need the funding, help and assistance the most are not receiving it,” said Qudus Abdul-Wahab, the owner of Sleek Layers, a hair salon in the Bronx. “It’s like the Titanic. Where was the water coming up first? It was coming from the bottom. The people on the bottom were drowning first.”
Black entrepreneurs, especially women, have been starting businesses at a higher rate than the rest of the population in recent years. But black-owned businesses seem to be struggling in part because they entered the lockdown in less secure shape than many other companies. As of 2019, the overwhelming majority of businesses in majority black and Hispanic neighborhoods did not have enough cash on hand to pay for two weeks’ worth of bills.
Lawrence Katz, an economist at Harvard, said he was concerned that the pandemic could hollow out lower-income neighborhoods, where job and income loss has been greater. That, in turn, would amplify the already great wealth and income disparities in the United States between rich and poor as well as between white people and people of color.
“I’m pretty confident that niche firms serving high-income individuals will come back,” Mr. Katz said.
White households have far more wealth than black households
Median net worth by race and ethnicity
Some business owners say they have found the most help from community organizations. Others adjusted their business model during lockdowns, allowing them to remain open for now.
“We’re resilient people. African-Americans, we’ve been through so much,” said Millie Peartree, the owner of Millie Peartree Catering, who has shifted during the outbreak to feeding essential workers and hungry children in the Bronx. “I’m always going to find a way.”