It’s no secret that Black-owned businesses were the hardest hit by the pandemic, with Goldman Sachs finding that they continue to face a tougher road to recovery. The Wall Street firm noted that 31% of Black small business owners have seen less than 25% of their pre-covid revenue return. If congress can’t figure out a plan to inject capital into these companies, we could lose an entire generation of Black and brown businesses.
The Breakdown You Need To Know
CultureBanx reported the disappearance of Black businesses is becoming more severe by the day, as economic conditions deteriorate due to COVID-19. In fact Goldman’s survey highlights how small business owners are on the verge of exhausting PPP Funding. The financial firm found that “43% of Black small business owners—compared with 30% overall—say their businesses’ cash reserves will be depleted by year’s end if Congress does not act in September.”
Losses for small business are being felt across nearly all industries and even for incorporated businesses. African-American businesses are being hit especially hard experiencing a 41% drop, Latinx business owners fell by 32% , and Asian business owners dropped by 26%. Additionally, only 2% of Black-owned businesses received Paycheck Protection Program (PPP) loans as part of the CARES Act, that’s funded 4.9 million loans totaling more than $521 billion.
Cash, Covid & Companies
Research by JPMorgan Chase found that Black businesses were already strapped for cash before the pandemic and some have suffered disproportionately since. Unfortunately, more than 90% of small businesses in majority Black communities only hold cash reserves that are equal to less than two weeks of operating capital, so they are more likely to run out of cash when customers stay at home.
Black businesses have been at the intersection of civil rights and economic prosperity for our community for generations. Since 2007, the number of companies owned by African-American women has grown by 164%, far outpacing their counterparts. Also, a 2018 survey found that the number of Black-owned businesses increased by 400% from 2017 to 2018, with the added effect of promoting the spending of money within the community.
Many experts feel the relationship between Black business owners and major banks has accelerated the demise of these companies across the country during the pandemic. The most recent Federal Reserve data illustrates that Black owners are denied loans at twice the rate of white owners.
Not to mention that the Center For Responsible Lending predicted the current PPP problem back in early April. It found that roughly 95% of Black-owned businesses and 91% of Latino-owned businesses “stand close to no chance of receiving a PPP loan through a mainstream bank or credit union.”
Corporate America has tried to step up and lend financial support. Companies including PayPal, Pepsi and Facebook have committed $530 million, $400 million and $100 million to Black-owned businesses, among others. With hope and votes, perhaps forthcoming relief will more accurately direct funds to the business owners who need it most.