Nearly half of Black small businesses had been wiped out by the end of April as the pandemic ravaged minority communities disproportionately, according to a report from the New York Fed.
Black-owned businesses were more than twice as likely to shutter as their white counterparts, the report found.
“Nationally representative data on small businesses indicate that the number of active business owners fell by 22% from February to April 2020—the largest drop on record,” the report said.
“Black businesses experienced the most acute decline, with a 41% drop. Latinx business owners fell by 32% and Asian business owners dropped by 26%.”
That figure has likely increased substantially as the pandemic has dragged on with a resurgence of cases this summer that has taken the country’s number of infections to a world record of over 5 million.
The number of white-owned small firms, in contrast, fell just 17%.
Why have Black businesses been twice as likely to close as their white counterparts, just as Black unemployment is often double that for whites?
It’s institutional racism, obviously, but the New York Fed report analyzes how that manifest itself in banking relationships and lending decisions, in cumulative, generational ways.
“Volumes of COVID-19 cases coincide with Black-owned business locations: two-thirds of counties with high levels of Black business activity pre-COVID-19 are in the top 50 COVID-affected areas,” the New York Fed said.
In the meantime, the coverage gaps in the Paycheck Protection Program left many Black-owned businesses out of the government relief bonanza.
“These loans reached only 20% of eligible firms in states with the highest densities of Black-owned firms, and in counties with the densest Black-owned business activity, coverage rates were typically lower than 20%,” the report showed.
At the same time, Black-owned firms, already smarting from a Great Recession that hurt them badly, already entered the crisis with “weaker cash positions, weaker bank relationships, and preexisting funding gaps.”
“Even the healthiest Black firms were financially disadvantaged at the onset of COVID-19,” said the report.