A new report from the Federal Reserve Bank of New York highlighted the devastating and disproportionate impact of the COVID-19 pandemic on black-owned businesses. The research findings note that there are several factors contributing to black-owned businesses bearing the blunt of the negative economic impact. These factors include that black run businesses were less likely to obtain funds through the federal PPP relief program and that these businesses often have weaker ties with banks that would typically extend crucial financing during economic downturns.
Through analysis of Census data, the research determined that areas with higher concentrations of black-owned businesses also had higher rates of COVID-19 infections than counties with a larger share of white-owned businesses. As a result, black communities not only are faring worse in economic outcomes during the pandemic but are also experiencing relatively worse health outcomes. In terms of the Paycheck Protection Program (PPP), areas with the highest concentration of black owned-businesses only 15-20% of firms received PPP loans.
This disparate outcome was likely because minority-owned businesses could have weaker historic ties with financial institutions and would therefore be less likely to receive capital. The federal relief programs left local banks with significant discretion in determining what business entities to finance and this resulted in significant disparities in loans prevalence along racial lines. The Federal Reserve Bank of New York also made a series of recommendations to policymakers for future coronavirus economic relief legislation.
The report indicated that relief should be more targeted at the most impacted and vulnerable communities. A continued reliance on bank lending without mandates or direct relief to businesses will likely result in continued inequities and worse outcomes for African American business owners.
The difficulty that Black businesses faced in obtaining financing through federally allocated funds is emblematic of broader, systemic discrimination that minority-owned businesses face on a routine basis. Project4Prosperity was formed to function as another tool that minority-owned businesses can rely upon to make it through this pandemic and mitigate systemic inequalities that exist within our economic system along racial lines.
Omeokwe, Amara. “Black-Owned Businesses Hit Especially Hard by Coronavirus Pandemic, Study Finds.” The Wall Street Journal, Dow Jones & Company, 4 Aug. 2020, www.wsj.com/articles/black-owned-businesses-hit-especially-hard-by-coronavirus-pandemic-study-finds-11596558754?st=bzkuh9d8v0r23or.