Nearly 40% of Black-owned businesses on the brink of closure due to pandemic

[CNN]

The owners of the Southwest Soda Pop Shop had run out of options.

At the very moment their ice cream shop was set to ramp up for the summer season, their customers had dropped to as few as one per day as the coronavirus pandemic spread through Washington, DC.

Their efforts to tap into hundreds of billions in federal aid through the Paycheck Protection Program had come up empty, and they were days away from having to shut down. It was a GoFundMe campaign, and a viral tweet, that saved them.

For the Jones sisters — Brittany, Brianna, Andrea and Lena — the last few months have been a harrowing experience, and one that, with the pandemic still very much alive in the US, hasn’t totally dissipated. But theirs was hailed as a success story, one of a community coming together to save and raise up a struggling local business.

“The GoFundMe was originally my dad’s idea,” Brianna Jones told CNN. “So you can imagine four young independent Black women, we’re like ‘Dad, a GoFundMe?’ That’s kind of like begging. It took a lot of pride to the side to even send out the GoFundMe.”

That it took a crowd-sourced campaign to save their livelihood — as trillions of dollars were coursing through the economy through federal relief efforts — underscored a reality faced by many Black-owned small businesses through the current crisis.

“Social media saved our business. Twitter saved Southwest Soda Pop Shop,” said Andrea Jones. “It was not the government. It was our community.”

The federal program designed to keep them afloat and keep their employees paid was structured in a way that made it exceedingly difficult to tap. Instead, in many cases it served to exacerbate the acute disadvantages faced by Black-owned small businesses in America.

From lack of relationships to banks, to minimal or less than pristine credit histories, to something as simple as the size and structure of their businesses, Black-owned small businesses faced built-in structural disadvantages, according to lawmakers, advocates, government officials and business owners.

“This is just laying bare all of the cracks and issues that were already there in this foundation and that people of color had been experiencing every single day,” said Ashley Harrington, federal advocacy director and a senior counsel at the Center for Responsible Lending.

The requirement that lenders prioritize borrowers from underserved markets wasn’t heed in the initial round of funding for the massive government program, according to the Small Business Administration’s inspector general.

To make matters worse, the SBA didn’t collect demographic data to identify whether — and where — there were gaps in the lending.

“Because the SBA did not require demographic data to identify PP borrowers in underserved markets, it is unlikely that SBA will be able to determine the loan volume to the intended prioritized markets,” the inspector general found.

Add to that the fact minority-owned businesses tend to be in industries where demand was hardest hit by the pandemic and the overall numbers for Black-owned small businesses, at least at this early stage, are devastating.

Across the country, the pandemic has been especially hard on Black and Latinx business owners. The number of Black business owners fell 41% between February and April, according to research from Robert Fairlie, an economics professor at the University of California at Santa Cruz. By comparison, the number of White business owners declined by 17%.

Government officials have scrambled to fix the minority-access issues to the Paycheck Protection Program.

Lawmakers used the second round of funding for the program to explicitly set aside $60 billion for smaller lenders, including Community Development Financial Institutions, which are dedicated to serving low-income people and communities that are missed by traditional lenders.

The Trump administration, last month, set aside $10 billion specifically for CDFIs and last week, SBA Administrator Jovita Carranza sent a message directly to lenders urging them to “redouble your efforts to assist eligible borrowers in underserved and disadvantaged communities.”

The efforts have been applauded by supporters on Capitol Hill and, at least based on topline numbers, have had an effect. Between CDFIs and Minority Depository Institutions, nearly $16 billion in Paycheck Protection Program loans have now been approved, though the full scope of their reach still isn’t totally clear. The SBA, late last week, also announced it would soon disclose demographic data of loan recipients.

That it got to the point where policy makers had to address shortcomings after hundreds of billions of dollars had already gone out the door is a point of frustration for those who have watched the response and one that builds into the broader structure inequities that exist.

“A lot of it has to do with who has a seat at the table, and who we think about in terms of who are the business owners that you know are at risk of closing doors,” Qubilah Huddleston, a policy analyst at DC Fiscal Policy Institute who has written on the program.

Lawmakers have pledged to go further and do more in the next round of small business assistance, which will be negotiated in July.

Sen. Marco Rubio, the Republican chairman of the Small Business Committee, called the 40% drop in Black-owned small businesses “stunning.”

“We’re going to have a very uneven recovery if it’s not addressed,” Rubio told CNN last week, making clear that he plans to target the issue of minority-owned businesses directly with the next package.

The stakes are enormous. Doni Crawford, who works with Huddleston at the DC Fiscal Policy Institute, said the greatest concern right now is that businesses who have for decades been central to the fabric of Black communities, simply won’t be there when the pandemic is contained.

“What does this look like next year, or five years from now? What are these communities going to look like?” she asked. “Because small businesses to us are really the heart of communities.”

As for the Jones sisters, they are carrying on a family legacy on Washington’s southwest waterfront. Their father, Darryl, worked for 25 years at the fish cleaning shop 30 feet away from the business they now own.

They were able to access an Economic Injury Disaster Loan from the SBA, but the money went quickly.

“The obstacles you face as a minority business, as a Black business, is you try to get these loans, you try to get the support, you try to get backed because they say it’s out here,” said Brittany Jones. “But they don’t express to you what you need. They don’t tell you about all of the programs that are out there. You’re blindsided by a lot of things.”

The more than $25,000 raised through their GoFundMe campaign has them remain fully open and operational as the temperatures make clear summer is officially in Washington.

This past weekend lines were as long as they’ve ever been for the shop — as much a result all of the attention their social media campaign as the heat itself.

“This is only the beginning for us,” Andrea Jones said. “We still have so many things we need to accomplish, so many bills that we need to pay, so many things that we need to do.”

By Phil Mattingly, CNN