A new report is shedding light on the impact of the coronavirus pandemic on Black communities and businesses in the United States.
According to the Federal Reserve Bank of New York, Black-owned companies are almost twice as likely to shutter as companies overall during the COVID-19 outbreak. It estimated that about 41% of such businesses across the country had shut down between February and April — compared with 32% of Latino companies, 26% of Asian firms and only 17% of white businesses during the same period.
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The study’s authors attributed these disparities to weaker financial savings and relationships with banks that can help provide that capital, as well as funding gaps that existed even before the health crisis took hold in the U.S.
“This brief shows the disturbing relationship between high geographic incidence of COVID-19 and the economic health of Black-owned businesses,” New York Fed assistant vice president Claire Kramer Mills said in a statement on Tuesday. “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 study draws on epidemiological data on COVID-19 cases and Census data on business locations. It also analyzed the geographic reach of the Paycheck Protection Program and small firms’ financial health based on data from the Federal Reserve’s Small Business Credit Survey. Using these sources, the brief examined the location concentration of COVID-19 cases and Black-owned companies, the reach of federal policy interventions and ultimately a business’ survival rate.
The United States has more than 3,000 counties, but the brief showed that 40% of Black-owned businesses are concentrated in only 30 counties — or about 1% of all counties in the country. Of these counties, roughly two-thirds of Black businesses are in areas with the highest level of COVID-19 cases.
Between April and June, nearly $521 billion in loans (with an average payout of $107,000) was doled out to businesses as part of the federal government’s Paycheck Protection Program. The Small Business Administration estimated that these loans went to small to mid-sized firms that supported more than 51 million jobs nationwide, or 84% of the country’s small business payroll.
However, the researchers’ analysis of the geographic distribution of those loans indicated that the aid did not reach America’s hardest hit areas: Most of the above-mentioned 30 counties reported seeing only 15% to 20% of Black businesses receive PPP assistance.
What’s more, the New York Fed noted that fewer than one in four Black-owned “employer” firms and one in 10 Black-owned “non-employer” firms have a recent borrowing relationship with a bank. These companies, read the study, are relatively more likely to turn to online lenders for funding.
“This tells us that a more targeted geographic focus on the hardest hit and most underserved places is needed,” Mills added. “Furthermore, the racial disparities in bank relationships prior to COVID-19 detailed here raise structural questions about the presence and functioning of banks in communities of color — questions that have heightened significance when banks are relied on to administer federal, taxpayer-supported relief programs, as is the case with PPP.”
Currently, a number of retailers, brands and designers have been urging consumers to “buy Black” to help boost Black-owned businesses amid the pandemic and heightened demands for racial equality. August also serves as Black Business Month — a time to recognize and celebrate the contributions of Black-owned firms across industries.