Congress Needs to Act Before Half of the US’s Black & Latinx-Owned Small Businesses Close

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According to a recent survey from ColorofChange, UnidosUS, and Global Strategy Group, close to half of Black and Latinx-owned small businesses expect to have to close their doors within six months, not knowing if they will have the ability to ever open again. From April 30 through May 11, 2020, 500 Black and Latinx small business owners, 609 Black workers, and 610 Latinx workers were surveyed.

The respondents painted a bleak picture:

• Among those who are still open and operating, almost half expect to close within 6 months if conditions remain the same.
• Small-business owners report major impact on their full-time employees, including being forced to reduce hours (44%), lay-off (21%), reduce wages (13%), or furlough (6%) employees.
• A majority (51%) of Black and Latinx small business owners who sought assistance requested less than $20,000 in temporary funding from the federal government. Only about 1 in 10 (12%) received the assistance they requested.
• Almost two-thirds report they have either received no assistance (41%) or are still waiting to hear whether they will receive any federal help (21%).
• For those who chose not to apply to federal assistance like PPP loans, respondents cited an application process that was too difficult to complete (14%); concern that they were ineligible for the programs (32%); and belief that they would not be approved (26%).

How did this happen? 

It’s pretty simple — by not prioritizing marginalized communities, they remained marginalized. That’s how implicit bias works, whether conscious or unconscious — when you claim the rules are neutral, but they clearly apply differently to different sectors of society.

“The survey backs up what so many of us already know: the Small Business Administration’s Paycheck Protection Program is a driver of racial inequality, rather than a means to provide desperately needed relief for the small businesses at the heart of Black and Brown communities,” said Color Of Change President Rashad Robinson.

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1. The SBA must clearly articulate to all lenders the prioritization of marginalized communities, and require the collection of demographic data.

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4. For small businesses that requested under $50k in PPP loans, make forgiveness automatic… and consider direct aid moving forward. 

One could argue that a loan amount under $50k basically serves as a subsidy for lawyers and accountants — as business owners are largely scared to spend PPP money that they aren’t promised forgiveness for. As Eda Henries, Founder and Volunteer Coordinator of www.covid19bizrelief.com — based in New York where many businesses see no near future of re-opening — believes, the “headcount” payroll reduction clause puts countless employers in a very tight spot. “The emphasis needs to be on forgiveness and not the overly complicated math. It’s going to be a bit of a nightmare. They need to reduce the 75% payroll requirement and get rid of the arbitrary 8 weeks, June 30 requirements,” says Henries. “Many businesses are in fact afraid to spend the money… which is super counterproductive.” Henries has spoken to over 150 small businesses and says “not a single business thinks forgiveness will be easy to achieve.”

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“First and foremost, Congress must remove the banks out of the equation and offer direct financial assistance to business owners of color for necessary expenses,” said Mehrsa Baradaran, a law professor at the University of California, Irvine.

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