The COVID-19 economic shutdown has hurt Black businesses the most, with Black owners seeing a 41% decline from February to April, a new study from the National Bureau of Economic Research shows.
The pandemic has hit entrepreneurs across the board, closing some 3.3 million small businesses (at least temporarily), but the sidelining of 440,000 African Americans was especially severe. In Houston, home to thousands of Black-owned businesses, the pain of shuttering them is monumental.
“Prior to the pandemic, we were doing very well,” said Bonita Billings, who owns B’s Wine Bar in Missouri City. “We thought we could survive after the first bar closures. We got a little bit of PPE money, but five months later, that’s gone. They offered me a loan, but I didn’t get into this business with a loan, and I didn’t want to have to stay in business with a loan.”
Billings found a way to sustain her business, after a call from the owner of Sugar’s Cajun Cuisine, a local restaurant.
“Much credit to the owner of Sugar’s who said both of us don’t need to be on this sinking ship. Let’s join forces where people can get the best of both worlds,’ Billings said.
She moved her business to the restaurant at B’s Wine Bar at Sugar’s was born.
“My business was to sit, drink and socialize. We’re still able to do that now, in a socially distant and safe manner,” she said.
An analysis from the Federal Reserve of New York shows that many Black-owned businesses were already in a tough financial spot when the crisis hit, and were less equipped to outlast the prolonged business closures seen in areas with high infection rates, possibly because they were in poorer financial shape, less prepared to tap federal aid and faced longer closures.
“COVID-19 has exacerbated these issues and businesses in the hardest-hit communities have witnessed huge disparities in access to federal relief funds and a higher rate of business closures,” the authors of the report wrote.
Only 4.3% of America’s 22.2 million business owners are Black, according to a February report by the Brookings Institute. And Black-owned businesses launch with about “a third less capital than their white peers and have difficulties raising private investments from mainstream investment systems,” reported Brookings. While 7% of white business owners get a loan in their first year of business, only 1% of Black business owners do so.
Compared to other small business owners, African Americans generally have to face more daunting challenges such as smaller cash reserves to draw from, difficulty in securing bank loans and other financing and being sole proprietors or “mom and pop” establishments that are ineligible for most loans.
Financial planner and wealth manager Ivory J. Johnson acknowledged that COVID-19 has shaken up U.S. businesses and hit Black customers hard.
“It’s having a tremendous effect,” he said. “Cash flow just stops. Ten percent retail, 10 percent of restaurants, 20 percent of the population just stopped. People didn’t have time to pivot. For Black businesses, access to capital may not be there and Black customers are going to be hit very hard. It’s going to be a challenge for all businesses. You have to figure out what you need to do now.”
Johnson, who founded Delancey Wealth Management. LLC in 2012, said 35% of small businesses couldn’t sustain a three-month shutdown, while 70% wouldn’t survive past six months.
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.
Chris Williams, the executive chef at Lucille’s in Houston’s Museum District, has spent a large portion of the pandemic giving back to the community. In June, he partnered with Jose Andres’ World Central Kitchen to provide 10,000 meals to underprivileged communities in Houston. Prior to that, Williams and Lucille’s delivered meals to hospital workers fighting the pandemic.
“We saw an opportunity,” said Williams. “Everybody in the service industry is going through this. We had the space, we had the idea, and we thought it would be great.”
Many Americans have been promoting “Buy Black” programs this summer to help save Black-owned businesses struggling to stay afloat as the pandemic and related government shutdowns rage on across the country.
Grassroots efforts to boost the economic fortunes of Black and minority communities in the wake of the police killing of George Floyd meeting with uneven results. In Houston, customer-facing enterprises such as restaurants and retailers, are enjoying the bump, while less visible accounting, legal, consulting and other services languish.
Officials at Windsor Village United Methodist Church decided to come together to help local restaurants by using its now-empty parking lot for a socially-distanced food truck park. A variety of Houston’s most popular food trucks convene every weekend.
The state of Black businesses in general is of major concern to the Greater Houston Black Chamber.
“Prior to the George Floyd incident, [Black businesses] were getting hit hardest because of COVID-19,” said said Carol Guess, GHBC chair.
“Most of those numbers that we’re seeing about Black-owned businesses closing are from February to April of 2020. The George Floyd incident didn’t happen until Memorial Day at the end of May. So the ones who are surviving are now doing better because of the bumps from that incident.
“It doesn’t negate the fact that we lost so many, it just further underscores the need for the bump that we’ve experienced. We need that traffic. And if we had had that traffic February through April, I’m sure that not as many businesses would have closed.”
Guess said true support will require a conscious shift in the types of Black-owned businesses with which people are willing to interface.
“Clothing and food have been normalized,” she said. “When it comes to someone doing my taxes, someone being my banker — like Unity National Bank, the only Black-owned bank in Texas — when it comes to them handling money, those services have not been normalized in the larger culture. But we are capable of handling all that, too.”
That’s exactly what local social media influencer Crystal Washington tried to do with a recent effort.
“While I already spend a large amount of money with Black-owned businesses every month [even post-COVID-19], it recently hit me that over 90% of those dollars are with service-based businesses. What about all of the products I buy regularly?” she said.
So Washington set out to replace as many products as she could, starting with personal grooming/toiletries.
“I’ve found substitutions for everything but dental floss and a special medicated wash. I should receive my order of cleaning supplies shortly as I was able to replace most household cleaning products. I bought a six-month supply of laundry detergent and fabric softener. I have toilet paper, paper towels and facial tissue on the way. I ordered a steel razor and blades.
“My next step will be looking at makeup and groceries,” she said. “These minority-owned, woman-owned, and local businesses need help right now. We can talk about it or be about it. Since no one is coming to save any of us, we have to save ourselves and our communities.”
Farrah Gafford Cambrice, an assistant professor of sociology at Prairie View A&M University, warned that widespread failures of Black-owned businesses would have effects that reach beyond the particular companies and immediate economic impact.
“When something like this happens and their businesses don’t get the support, that’s a devastating message to give to would-be entrepreneurs,” she said. “For generations.”
Resources for Black-owned businesses
Grants.gov – See 1,000 federal grant programs, conduct an in-depth search, learn about the application process and ultimately apply.
Minority Business Development Agency – MBDA is an agency of the U.S. Department of Commerce that aims to assist minority-owned businesses across the country.
National Minority Supplier Development Council – A non-profit corporate membership organization that supports minority-owned businesses. The NMSDC has a Business Consortium Fund intended to support certified minority-owned businesses.
Accion – A nonprofit organization that provides loans, access to resources and connections to diverse business owners and entrepreneurs.
Backstage Capital – A venture capital fund that invests in women, people of color and the LGBTQ community. Its Entrepreneur Investment applications are viewed on a rolling basis.
Foundation for Business Equity – FBE’s Business Equity Initiative supports and provides funding for Black and Latino business owners. Created a response strategy team to advise businesses and a COVID-19 emergency fund.
Greater Houston Black Chamber – Founded in 1935 as the city’s first African-American civic organization, the GHBC offers a forum to reach and partner with African-American owned businesses, entrepreneurs and professionals. Visit https://ghbcc.com