Black-Owned Businesses Closing at Dramatically Higher Rates

The financial fallout caused by the COVID-19 pandemic is revealing the ways in which systemic racism operates on an economic level.

Recent research shows Black-owned businesses closing at a disproportionate rate compared to white- and other minority-owned businesses.

From February to April, 41 percent of Black-owned businesses closed their doors—the largest group of small businesses affected.

During the same period, which represents the largest drop in business owners on record, immigrant business owners experienced significant losses as well—36 percent—while Hispanic business owners fell by 32 percent, Asian business owners dropped by 26 percent, and women-owned businesses were hit by 25 percent.  Just 17 percent of white-owned businesses closed.

But what are the specific causes that make Black-owned businesses most vulnerable to economic plummet, and how can we change them?

Systemic racism manifests itself in U.S. economic systems in a variety of ways. For instance, Black business owners are less likely to have access to bank credit and have much more trouble getting loans.

Black-owned businesses are also more likely to operate in sectors particularly affected by COVID-19 closures, such as leisure, hospitality and retail.

What’s more, access to pandemic relief measures are also infused with racism. Surveys show that a majority of businesses run by people of color who applied for the federal Paycheck Protection Program (PPP)—a program designed to provide economic relief due to the COVID-19 crisis and extended to August 8 on Wednesday—were denied a loan. According to the survey, just 12 percent of Black and Hispanic-owned businesses who applied got the loan.

Notably, this disparity was documented only by external monitoring by racial equality organizations—the program itself does not keep track of these statistics, showing how mechanisms for accountability are marred by systemic racism and white supremacy.


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This disparity in PPP payouts is a direct result of preexisting economic discrimination, according to experts. Because the public program uses private banks as intermediaries, credit disparities caused by discrimination impact business eligibility for PPP, and thus less Black and minority-owned businesses end up qualifying for the program.

Black-Owned Businesses Closing at Dramatically Higher Rates
Wall Street demonstrators in New York City on September 22, 2014. (Stephen Melkisethian / Flickr)

“Any time you create a big program and give banks the ability to choose which customers it prioritizes, you’re going to have disparities,” Mehrsa Baradaran, a law professor at the University of California, Irvine, told NBC. “Credit disparities are where past injustices lead to present disparities.”

The good news: In the wake of recent protests and online activism against racial injustice, social media users are bringing more attention to the importance of supporting Black-owned businesses.

Even celebrities are joining in—to accompany the release of her new single “Black Parade,” Beyoncé launched an online directory of Black-owned businesses.

While business owners are thankful for the show of support, many worry about their long-term prospects—a burst of support is great, but systemic change requires a long-term commitment, on the part of institutions as well as individuals, to altering the way we do business in this country.

“We’re not going to have social justice in this country, if we don’t have economic justice,” Regina Smith, the executive director of the Harlem Business Alliance in New York City, told CNN.

Hopefully the awareness about economic injustice generated by recent events will prove to be a catalyst for larger structural change.


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About

Oliver Haug is an Editorial Intern with Ms. Magazine and a recent graduate of Smith college. Their writing has previously appeared in Autostraddle and the New York Times' newsletter "The Edit." You can read more of their work here, and follow them on twitter here.