Internet Explorer 11 is not supported

For optimal browsing, we recommend Chrome, Firefox or Safari browsers.

Minority Businesses Need Help in the Pandemic. Government Can Provide It.

The pandemic has devastated small businesses that employ millions of Americans. Public officials can tap the expertise of strategic partners to give these companies a chance to survive — and thrive.

COVID-19 has taken the lives of more than half a million Americans, disproportionately people of color. But it also has had a devastating effect on small businesses, in particular Black- and Latino-owned ones. Few are talking about this misfortune, but these businesses, along with home ownership, have been the primary means by which these communities have accumulated wealth.

According to a much cited study, median Black household wealth is on a path to decline to zero by 2053 if the racial wealth divide is unaddressed. Public officials must raise awareness of the negative effects the coronavirus is having on minority businesses and, along with key strategic partners, do something about it.

It's hard to overstate the severity of the problem. The Federal Reserve Bank of New York reported last August that Black-owned companies were almost twice as likely to go under, compared to small businesses in general, as a result of the impact of COVID-19. While the number of white business owners had fallen by 17 percent, according to the report Black-owned business experienced a closure rate of 41 percent and the number of Latino and Asian business owners fell by 32 percent and 22 percent, respectively. And those numbers covered only the early months of the pandemic, last February through April.

There are a variety of reasons for these disparities: The number of minority customers these businesses depend on shrunk because they caught the virus or were afraid of catching it; the federal government failed to properly target the $284 billion Paycheck Protection Program (PPP) to businesses with the greatest need; the banks responsible for administering the PPP discriminated against minority businesses; and information on the PPP did not reach those businesses in sufficient numbers.

Many of these problems are fixable, and there are some encouraging signs: The Biden administration, for example, established a two-week window in which only small, minority- and women-owned businesses could apply for PPP funding. Hopefully adjustments like this will slow the pace of small business failures. That's all the more important given that while Black-, Latino- and Asian-owned companies comprise only 20 percent of all U.S small businesses, these firms still employ "8.7 million workers at a total annual payroll of $280 billion and amassing $1.3 trillion in total annual receipts," according to the Small Business Administration.

To be sure, most pubic officials agree that we should do everything possible to help minority businesses survive the pandemic — and even thrive after the plague ends. But the critical question, given the limited resources of state and local governments, is how they can be most effective. Beyond bringing awareness to the $150 billion of PPP dollars that still are available and helping small businesses apply, public officials can develop strategic partnerships with nonprofit organizations and higher education institutions. They have credibility within their communities, are in touch with businesses on a regular basis within their service areas and often provide technical assistance to them.

One such nonprofit organization with bona fide experience in working with minority businesses is the National Urban League. Most major cities have a branch of the UL nearby or within their jurisdictions. The UL, once headed by the recently departed civil rights leader Vernon Jordan, is good at focusing on the needs of its clients and helping them apply for loans and other types of governmental assistance. Adding to its credibility, the UL also provides services in areas like health care, housing and workforce development.

Many higher education institutions also have solid reputations working with small and minority businesses and state and local governments. When I served as a vice president at Benedict College, a historically Black institution in Columbia, S.C., I supervised staff and programs at the college's business development center, a facility that, in addition to providing incubator space to about 20 businesses, administered a microloan fund and provided a wide range of technical assistance. We worked closely with small businesses with less than 20 employees, the priority group President Biden has targeted first to receive this round of PPP.

Later, as president of Georgia Piedmont Technical College, I asked the college's economic-development division to work closely with the school's business department to put together a minority business-development program aimed at helping "mom-and-pop" businesses grow. Programs such as these enabled our college to stay connected to our areas' small businesses and transfer knowledge to state and local governments.

One additional benefit to partnerships between governments and higher education institutions is that they provide an opportunity for students to gain hands-on experience working with small businesses. Relatedly, tech-savvy students can help minority businesses better function within cyberspace, since almost all government services are housed online, including how to apply for PPP funding.

The pandemic has shined a bright light on many inequities in society, including the historic discrimination and hardships faced by small and minority businesses. Public officials can ameliorate some of its worst effects by developing smart partnerships with organizations that have both the desire and the expertise to reach businesses with the greatest needs.

Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.


Government and education columnist
Special Projects