When something is bad for all small businesses in America, it is worse for Black-owned enterprises, according to a Black economist.
Keith Millner, his wife Charmaine, and two friends started a Jersey Mike’s Subs sandwich business in Atlanta in 2019, never expecting to end up behind the counter. Their doors opened four months before the COVID epidemic shut down the country in November 2019. When shops reopened in July 2021, the nature of commerce had shifted, and black enterprises felt the effects. Finding dedicated workers post-pandemic was part of the effort for this crew at Jersey Mike’s. They were forced to wear aprons, hats, and roll up their sleeves since they had few other options.
“It’s either that or close the business,” said Millner, a former commercial banker who now teaches corporate culture, public speaking, and other topics to individuals and organizations. “Every part of the business was taught to us.” So, sure, we worked the counter, cooked sandwiches, operated the grill, ordered merchandise, and did whatever else was required. “We still do.”According to a recent U.S. Chamber of Commerce survey of small business owners, the top concerns businesses face today are inflation and supply chain issues. However, black business owners, such as Millner and Co., face additional challenges that are particular to the black community.
According to research on the government’s Payment Protection Program (PPP), black businesses, unlike their white counterparts, face systemic prejudice. According to the report, structural injustices are “incorporated into the administration of the program, the application procedure, and the cost structure.” Furthermore, when seeking bank financing, black firms frequently face prejudice and discrimination, making it harder for them to obtain loans.
“We know that when something is bad for all small businesses in America, it is even worse for Black-owned firms,” said Nicholas J. Hill, Dean of the School of Business at HBCU Claflin College in Orangeburg, South Carolina. “As a result, any form of economic shock or supply shock, such as a pandemic, will impact us far harder.” According to a Future Forum report, there has also been a significant increase in the number of black workers who prefer flexibility over standard 9-to-6 schedules, resulting in labor shortages.
According to a Future Forum/Slack survey of 5,448 workers, 83% of Black workers prefer a flexible working schedule to build a work-life balance, creating a labor scarcity for Black business owners serving the Black community, particularly in the service industry. Millner’s Shirt Mike’s in Atlanta is in an area with a predominantly Black population and employment. These figures, according to Millner and his corporate executive partners Charmaine Ward, Eric Harrison, and Nicole Williams correspond with their continuous staffing challenges.
“Their freedom and schedule flexibility are more essential to them than a regular wage,” Millner said of several young black workers he has hired. “As a result, they will drive for Uber or Lyft.” They’ll take odd jobs, or they’ll go work for a moving business for a day or two, or they’ll take four roommates to split the rent. In terms of lifestyle, they are making a variety of choices. And it has ramifications for business. “
The difficulty in obtaining money
According to the Chamber of Commerce report, 85% of small business owners are concerned about the impact of inflation on their operations, up from 74% in the previous quarter. Inflation is the top issue for one-third of small business owners, and 67% have raised prices in response. These worries are also felt by Black-owned enterprises. The most difficult challenge, however, is locating people ready to finance their venture.
Maya Barfield, a veterinarian who owns Willow Brook Animal Hospital in Dallas, was surprised and disappointed when she and her husband were denied bank financing despite having perfect credit and wanting to buy an established, successful firm. “You put together a fantastic portfolio, yet it’s not enough,” remarked Barfield. “We took six months to complete a process that should have taken 30 to 45 days.” It was draining. Our white peers, who are on an equal playing field, had no such issues.”
She and her husband, a pharmaceutical industry executive, had to rely on programs like the Local Initiatives Support Corporation’s (LISC) Black Economic Development Fund to get the funds they needed to start their business.
This is a concern that is particular to black business owners. A number of studies and groups have identified disparities in financing procedures, all of which point to black entrepreneurs being refused at a much higher rate than non-Blacks. According to the Federal Reserve, more than half of black business owners were denied bank loans, which is twice the rate for white business owners. The U.S. Small Business Administration’s flagship 7(a) program reduced loans to Black businesses by 35% in 2020, the agency’s greatest drop in lending to any race or ethnic group recorded. When Millner and Company attempted to open their Jersey Mike’s restaurant, they had an unusual encounter. They acquired two letters of permission from big banks. However, they were advised just days before the deadline that they could not be funded.
“We all have A-1 credit,” he remarked. “We had purchased the initial inventory and equipment, signed a 10-year lease, and hired staff.” We then had to scramble. “I used to be a banker, so I know how it goes.” Approving someone and then withdrawing the offer right before closing was not a frequent procedure.” They were able to leverage their resources “and locate alternate funding” since they are well-connected in Atlanta, according to Millner. “However, it was incredible that we had to go through it.”
According to the Brookings Institute analysis, many Black firms had better luck obtaining loans from non-traditional banks. According to NPR, Savannah, Georgia’s Black-owned Carver State Bank assisted several Black firms that had been denied loans from mainstream banks, issuing $9 million in PPP loans in five months. However, not all PPP loans have benefited Black-owned enterprises. In their report, the Center for Responsible Lending mentioned some of these issues.
“The Paycheck Protection Program continues to be detrimental to small businesses, businesses run by persons of color, and enterprises that do not employ anyone.” “PPP loans may be forgiven if the business uses the cash for authorized expenses within eight weeks of getting the loan,” according to the article. “This condition makes ensuring loans are forgiven rather than transformed into long-term debt difficult, particularly for very small enterprises.”
Support from non-black people has declined.
The response of the Black Lives Matter-led social justice movement of 2020 galvanized black-owned businesses. Inspired by the cause and dissatisfied with long-standing disparities that were on full show when George Floyd was murdered by a Minneapolis police officer, BLM helped spark a drive to support Black-owned companies. There was no data to back up the increase in sales that owners claimed they originally felt, but they claim there was an anecdotal surge once shops reopened following the pandemic-forced shutdown.
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Searches for “Black-owned businesses near me” peaked in June 2020, according to NBC Bay Area, with companies like Yelp making it simpler for individuals to identify and support Black-owned businesses, according to Google data.
That meant that non-Black customers were also on board. “I felt it and I saw it,” Mel Banks, who was looking for a birthday present for his wife at The New Black Wall Street in Stonecrest, Georgia, approximately 17 miles east of Atlanta, claimed last week. It is a mall with over 100 Black-owned shops and restaurants.
Banks, who lives in nearby Conyers, said he frequents the mall and was surprised by the number of non-Black shoppers. “White people were there buying goods” when the mall opened in May 2021. “Make no mistake, it was primarily us,” he stated. “However, there was some white backing.”
However, enthusiasm for the BLM campaign waned over time. As the BLM movement died down, so did support. Tremaine Jasper, the owner and editor of PhxSoul.com, a website that advertises events and features a Phoenix-area Black-owned company directory, said the social justice movement and community effort to support Black-owned business benefited him. He claimed to have received up to 10,000 views in one day, compared to 13,000 in a month. His website was supported by mainstream media outlets such as Jay-Roc Z’s Nation.
While traffic on his website has significantly decreased since then, Jasper has also seen a decrease in revenue from advertising and grant funding opportunities, which were considerably more publicized and made available to entrepreneurs during the pandemic. He said it’s tough to pinpoint the cause of the fall, but one element could be a decrease in media coverage of Black-owned firms.
“I think PhxSoul.com has definitely faded in the minds of folks who don’t visit the website on a regular basis,” he stated. The same can be said for Nikia Londy, the owner of Intriguing Hair, a wig and hair extension store in Boston. During the height of the social justice movement, corporations and financial institutions vowed to support Black-owned enterprises, according to her. Londy, 37, says she doesn’t “truly see where that has gone” two years later.
Alternatives for Black-owned Businesses
Steve Hall, LISC’s vice president of Small Business and Economic Development Lending and its national director of Entrepreneurs of Color Fund, said the company has also invested $250 million into its Black Economic Development Fund to alleviate some of the economic challenges in Black communities and help close the racial wealth gap.
This aided small company owners like Londy, who experienced significant financial difficulties both during and after the outbreak. Apart from trying to make payment during the government shutdown and having her store looted during the 2020 protests, Londy was denied a 10-year business loan by her bank. Londy stated that her bank’s denial “didn’t make sense,” and she was happy for the additional funding alternatives supplied by LISC.
The salon owner eventually obtained two $10,000 grants, one from Verizon’s Small Business Digital Ready program via LISC and one from PayPal via the Association for Enterprise Opportunity, a program that offers cash and services to underserved communities. She was also able to hire three college interns from the Hult International School of Business through LISC’s digital accelerator program, who worked on a digital marketing campaign for Intriguing Hair and helped increase client traffic to the salon.
LISC also collaborates with a number of large banks and insurance firms, as well as public and private foundations that support communities of color. According to Hall, who oversees LISC’s small company and commercial loans, the organization collaborates with partners and foundations to reduce borrowers’ down payment risks. According to Hall, the typical down payment risk for commercial real estate borrowers is roughly 10-20%, but his organization reduces it to 3 to 5%.
Hall recommends Black firms to pursue fields, such as professional services, where they have a better chance of success. According to Hall, Black-owned firms should be present in more areas and should reflect community demands. He uses “The Jeffersons,” a popular 1970s Black sitcom about a Black guy who became wealthy as a dry cleaners entrepreneur, as an example of a commercial venture that Black people embraced.
“We dominated the dry-cleaning business nationally in the 1970s and 1980s,” Hall said. He claims that is no longer the case, adding that Black Americans “didn’t see the benefit in it. “Jasper is now focused on finding solutions. He also stated that Black business owners must realize the need of collaborating with other Black-owned businesses: “Let’s work on our strengths and flaws and strive to present a favorable opportunity.”