Over One-fourth Of Black-Owned Businesses Declined From February To April
August 4, 2020
Black-owned businesses, as well as Black communities in general, were particularly hard hit by the COVID-19 pandemic. Over 40% of Black-owned businesses were shuttered between February and April, according to new research from the Federal Reserve Bank of New York.
The New York Fed released a brief discussing the effects of COVID-19 on Black communities and Black-owned businesses in particular. The brief looks at why Black-owned firms have been almost twice as likely to shutter as firms overall during the pandemic.
The study draws on epidemiological data on COVID-19 cases, Census data on business locations, data on the geographic reach of the Paycheck Protection Program (PPP), and data on small firms’ financial health from the Federal Reserve’s Small Business Credit Survey. Using these sources, the brief examines the geographic concentration of COVID-19 cases and Black-owned business locations, the reach of federal policy interventions, and business survival rates.
"This brief shows the disturbing relationship between high geographic incidence of COVID-19 and the economic health of Black-owned businesses," said Claire Kramer Mills, assistant vice president at the New York Fed. "These firms had weaker financial cushions, weaker bank relationships, and preexisting funding gaps prior to the pandemic. 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.
“This tells us that a more targeted geographic focus on the hardest hit and most underserved places is needed. 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.”
Key findings from the brief include:
Geographical Concentration of Black Businesses
Limited Paycheck Protection Program Reach
Less of a Financial Cushion and Weak Banking Relationships
Black Business Closures
Read the entire brief on Black-owned businesses.
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