More than half of Black-owned businesses may not survive COVID-19

One report found 41 percent of Black-owned businesses have been shuttered by COVID-19 compared to just 17 percent of white-owned businesses.

For Monique Greenwood, this year started strong. She celebrated 25 years as proprietor of Akwaaba Bed and Breakfast Inns, and business was good. Then the pandemic struck, triggering a flood of cancellations. In a matter of days she went from a projected 80 percent occupancy rate to zero. Greenwood, who operates B&Bs in Brooklyn, Philadelphia, Washington, D.C., Cape May, New Jersey, and the Pocono Mountains in Pennsylvania, was forced to lay off nearly all of her 15 staff members as she endured three months with virtually no income.

By June, she was hopeful again. Covid-19 cases seemed under control, and the nation began reopening. “I’m an optimistic person by nature,” she says. “I’m always going to feel I will make it. I don’t know how, but I will find a way.”

But then the virus came roaring back, this time in regions that had been relatively unscathed. The encouraging new bookings at Akwaaba’s vacation-area properties in Cape May and the Poconos disappeared. “This is the worst thing, my worst fear,” Greenwood says. “I was cooking with gas. Now I’m getting cancellations.”

COVID-19 shutdowns have pounded Black-owned businesses particularly hard. Research at the University of California, Santa Cruz, and a report by the National Bureau of Economic Research found that 41 percent of Black-owned businesses—some 440,000 enterprises—have been shuttered by COVID-19, compared to just 17 percent of white-owned businesses.

“I knew it would be bad, but I didn’t think it would be this devastating,” says Robert W. Fairlie, author of the UC Santa Cruz report and a professor of economics at the university.

The stress of the virus, added to years of systematic racism and economic disparities, has Black businesses reeling. The ones that held on through shutdowns and were beginning to reopen are being slammed again as the number of cases spike in states like Florida, Texas, Arizona, and California. Most impacted are Black-owned bars and restaurants. (See where coronavirus cases are growing in the U.S.)

“After 90 days without positive cash flow, you will feel a lot of pain,” says Harold T. Epps, former Philadelphia commerce secretary and senior advisor at Bellevue Strategies. “It doesn’t matter if you are a barber, beauty supply store, food provider, or other retail outlet. Many are challenged by cash flow on a good day, and over the last 90 days it’s been nonexistent. That will result in one out of every two not returning.”

Yvonne McNair, founder and CEO of Captivate Marketing Group, expects to lose a full year and a half of income. In early March McNair had been preparing to announce the lineup for the 2020 Essence Music Festival, one of her largest clients. The annual event in New Orleans draws half a million people over the July 4th weekend and features some of the country’s biggest African-American entertainers.

Then, on March 11, everything fell apart. The World Health Organization proclaimed the coronavirus a global pandemic, and the National Basketball Association shut down after a player tested positive for COVID-19. The news sounded the death knell for the Essence Festival, which first was postponed, then cancelled. (Despite the pandemic, New Orleans' culture marches on.)

Before McNair knew it, 95 percent of her business for the year was gone. She had to lay off all seven of her employees and 25 independent contractors. “I’ve had to put my staff on hold and hope when things come back they will come back,” she says.

Why Black businesses are more vulnerable

According to the Economic Policy Institute, “The disparate racial impact of the virus is deeply rooted in historic and ongoing social and economic injustices. Persistent racial disparities in health status, access to health care, wealth, employment, wages, housing, income, and poverty all contribute to greater susceptibility to the virusboth economically and physically.”

Kristen Clarke, president and executive director of the Lawyers’ Committee for Civil Rights Under Law, says Black Americans are still recuperating from the economic collapse of 2007-2009, which had a staggering impact on Black wealth. “Unlike other communities, African Americans are not as equipped today to recover from a second period of economic collapse.”

Epps agrees. “The impact of COVID opens all of the inequities, disparities of the double and triple standards in America,” he says. “When it comes to education, income, business, or health, we are disadvantaged and devastated to a much larger extent than white people.”

Andre Perry, a fellow at the Brookings Institution in Washington and author of the book Know Your Price: Valuing Black Lives and Property in America’s Black Cities, says the lack of wealth in the Black community has had a huge impact on its ability to survive the pandemic.

“Because a lot of Black business owners don’t have the kind of equity due to structural racism, they have less of a cushion to withstand this particular moment in time,” Perry says. “If Black businesses and individuals had the same type of cushion as their white counterparts, we would not be in this situation.”

According to Fairlie, the UC Santa Cruz economist, half of all Black families have less than $9,000 in total wealth, while the median wealth for white families is $130,000. “If you need $10,000 to get through a rough period, you can do it if you have $130,000,” he says. “If you have only $9,000, that makes it impossible.”

In addition, Perry says, fewer Black businesses have relationships with banks. “Blacks receive business loans at about half the rate of their white counterparts, and when we do receive loans, it’s at higher interest rates.”

The big question: How many Black-owned businesses will be able to reopen? The 2009 recession, considered at the time to be the worst economic downturn since the Great Depression, saw 60 percent of Black businesses close and not reopen, compared to 50 percent of white businesses, Perry says. “I expect this pandemic to offer a worst outcome.”

No credit, no help

The government’s much-publicized Paycheck Protection Program (PPP) was designed to help small businesses cover payroll and benefits for their employees, as well as pay rent or interest on mortgages. But 95 percent of Black-owned businesses, and 91 percent of Latino-owned businesses, had virtually no chance of receiving a loan, says Aracely Panameno at the Center for Responsible Lending.

To qualify for a forgivable loan, businesses needed to have a relationship with a bank, Panameno explains. Many Black-owned businesses don’t have such a relationship, nor do they have the minimum number of employees required to qualify. Banks that cater to the Black community were not included in the first round of funding, Panameno says, and banks earned larger fees handling larger loans.

“I would add that, from the historical perspective, redlining and discrimination in the financial services shut out the Black community,” she says. “They don’t have credit. They can’t get credit because they don’t have credit, and they don’t have credit because they can’t get it.”

One Black business owner who defeated the odds and received a PPP loan was Dawn Kelly, owner of The Nourish Spot in New York’s Jamaica, Queens. The loan, she says, “helped tide me over and fill in some of the gaps.”

Her shop, which specializes in juices, smoothies, salads, and wraps, never closed, and none of its five employees were laid off. Kelly reduced hours and pivoted to curbside pickup, and early on she equipped staff with masks and gloves and barred customers from entering the shop. But other businesses in her neighborhood haven’t managed to stay afloat.

“I think a lot of people have had to close,” Kelly says. “It’s too difficult and too many bills. People still have to pay rent and salaries. And they did not allow you to defer sales taxes. You see a lot of for sale signs on businesses because they are not able to come back.”

Black businesses also tend to cater to Black consumers, many of whom have been hit hard by the shutdowns. According to the Economic Policy Institute, African Americans “have suffered record numbers of job losses in the last few months, along with the ensuing related economic devastation.” The Black unemployment rate rose to 15.4 percent in June. (African Americans also struggle with a disproportionately high COVID-19 death toll.)

Struggling to survive

Across the nation, from Prince George’s County, Maryland—the most affluent majority-Black county in the U.S.—to New Orleans and Chicago, Black businesses big and small are struggling to reopen, and those that didn’t close are struggling to stay open.

“We know we’ve lost a good number of Black businesses in our county,” says Angela Alsobrooks, county executive for Prince George’s County in Maryland. “Our Black businesses in Prince George’s County are being affected in a way similar to the rest of the nation.”

Karl Turner, CEO of A La Carte Specialty Foods in New Orleans, which sells seafood to restaurants nationwide, says widespread closures slashed sales 90 percent.

“We didn’t lay off anyone, but we had to cut costs,” Turner says. “We had to lower salaries across the board by 25 percent. In my case it was 50 percent. As founder of the company, I took the biggest hit.”

Orders from the Carolinas and Virginia were picking up “because of the beach trade,” Turner says. “But now that may slow down because of what’s going on. We have seen a significant drop off in Texas and Florida because of the [restaurant] closures. I can’t even say I’m optimistic. I’m very worried.”

He’s not alone. M&R Prescription Center has been on Chicago’s South Shore for 37 years. It remained open during the shutdown, but business was anything but normal. Doctors’ offices were closed, so prescriptions weren’t being written. Prices of supplies were doubling and tripling, and vendors were limiting products. M&R was unable to supply customers essentials, like protective gloves.

The riots and looting following the death of George Floyd made a bad situation worse. Thieves broke in and stole drugs. Without warning FedEx and UPS stopped deliveries to the neighborhood for five days.

“That made things really bad,” says pharmacist and owner Pamela Jones. “I had medicines that I had ordered, some that needed to be refrigerated. In some cases, we had to order the same medication from another supplier to get it delivered by another source. One package was diverted 40 miles away.”

Jones said closing the business has crossed her mind. “I go back and forth. We have a legacy in the community. I would like to keep the business open and thriving. It’s so easy to get kicked down, and harder each time to pick myself back up. I’m trying to serve the community and trying to serve myself at the same time without going broke or going crazy.”

Business helping business

Lester Barclay, a Chicago attorney who represents several small businesses, says the solutions lie with corporate America. “The federal government has done what it can. Our municipalities don’t have the resources. It has to come from the private sector.”

Some major corporations and philanthropists have begun to move in that direction. Singer and philanthropist Beyoncé Knowles-Carter is donating proceeds from her new single, Black Parade, to small, Black-owned businesses. Netflix is donating $5 million to organizations dedicated to creating opportunities for Black creators, Black youth, and Black businesses. Google will spend $175 million on financing Black-owned businesses and supporting Black entrepreneurs. Facebook will spend $200 million to support Black-owned businesses and organizations. And Charter Communications will invest $10 million “to support Black and other minority-owned small businesses in underserved communities.” (Here's why a co-founder of the Black Lives Matter movement is hopeful for the future.)

That’s great news for businesses such as historic Neir’s Tavern in Woodhaven, New York. After being completely shut down for nearly three months, owner Loycent Gordon reopened in mid-June with limited hours. Though New York delayed inside dining again after cases started to spike in other states, Gordon recently offered outside dining for the first time.

“If things continue this way, maybe we will be okay,” he says. Neir’s can seat up to 30 people outside. Before the pandemic, it could seat 40 people in the dining room and another 14 at the bar.

“Right now, based on last week, we were at a little over 50 percent of our pre-COVID revenue. Last week was the first week of outdoor dining. People came out. They would sit on the floor just to get out,” says Gordon, who doesn’t expect to be able to rehire the staff of 10 he had before the shutdown. He now has four employees, none from his pre-COVID-19 staff.

“I’m hoping people will continue to come,” he says. “I think with 60 percent [of pre-COVID revenue] and the expenses we cut, we can outlast the pandemic. I try to be optimistic and see the bright side in everything, because I could have closed like so many other places. But everybody’s different. Based on what’s happening and based on last week’s numbers, I’m optimistic for us, but not so confident for the industry as a whole.”

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