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Black small businesses harder hit by COVID-19: NY Fed

Black small businesses harder hit by COVID-19: NY Fed
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Black small businesses have been harder hit by the COVID-19 pandemic than those owned by members of other racial groups, according to a study from the Federal Reserve Bank of New York

"Black firms have been almost twice as likely to shutter as small firms overall," a brief by the bank's Assistant Vice President Claire Kramer Mills and senior analyst Jessica Battisto said. 

While small businesses are reeling across the board, the study noted, with a 22 percent drop in the number of small-business owners overall, Black business owners faced greater drops, with the Fed seeing 41 percent fewer of them. Thirty-two percent of Latinx-owned businesses have shuttered, followed by 26 percent of Asian-owned businesses. The drop in white business owners was 17 percent. 

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Part of the reason is simply geography. Black communities tend to be more concentrated in cities, and cities have been harder hit by the virus than rural areas.

"An under-appreciated point, underscored here, is the close ties between the health and economic effects of COVID-19 in specific communities: counties with the highest concentration of COVID-19 are also the areas with the highest concentration of Black businesses and networks," the authors wrote. 

But other factors played a part as well, included limited access to government relief programs such as the Paycheck Protection Program, and less access to finance and banking to begin with.

“These firms had weaker financial cushions, weaker bank relationships, and preexisting funding gaps prior to the pandemic,” said Mills. 

“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,” she added, arguing that the next round of federal aid should offer more aid to harder-hit geographic areas. 

Data from a Chamber of Commerce survey released Tuesday further backed up the findings, showing that minority-owned businesses reported having harder times obtaining loans and saw worse outlooks for their business's futures. 

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Sixty-six percent of minority-owned small businesses were concerned about permanently shuttering, an 8-point increase compared to nonminority businesses, though the gap was down from 26 points in May.

"The pandemic’s disproportionate impact on minority-owned small businesses is further evidence of systemic inequalities in our country. Even more concerning, the pandemic could exacerbate and elongate the economic struggles already facing minority-owned businesses and families," said Chamber President Suzanne P. Clark. 

The survey also found that since the racial justice protests following the death of George Floyd in police custody, 69 percent of small-business owners across the board believed that minority businesses faced tougher challenges. That represents a 17-point increase compared to before the protests.