As businesses scrambled in the first few months of the COVID-19 pandemic, it quickly became clear that some were hit harder than others. According to research out of the University of California Santa Cruz, the amounts of business owners of color experienced the largest decreases (African American -41%, Latino -32% and Asian -26% from February to April 2020). Coming back from those losses is proving to be a big task.
“The recovery, just like the pandemic, hit businesses of color harder,” said Robert Villarreal, chief external affairs officer of CDC Small Business Finance + Capital Impact Partners and member of the CA FWD Investing in Small Businesses Owned by People of Color work group.
He described the problem many POC-owned businesses face, saying “If they’re in the food business, they’re having trouble hiring people and they’re just not getting the cash flow that they did before.” He added, “They didn’t have those banking relationships to help them get through, so they’re a little bit at a loss of who they would turn to.”
A working session during this year’s California Economic Summit, which will be held in Monterey November 9-10, will explore the economic benefits of supporting and investing in local and small minority-owned businesses.
The workgroup’s framework includes transforming capital access programs and scaling affordable lending systems through system change and at the provider level.
According to Villarreal, some of the highlights of the work include the creation of the California Small Business Coalition for Racial Justice composed of 17 organizations under a grant from the California Endowment. The coalition’s initial three members worked to get funds from the Paycheck Protection Program (PPP) to women-owned and POC-owned businesses through shared resources. To continue and expand its work the coalition added additional members from across the state. The coalition meets monthly to talk about racial equity focused on small business and how to do a better job at framing a racial equity lens both in lending and business advising.
Three sub-committees have focused on:
- Creating a policy playbook that will inform non-profits on how to communicate to elected officials on the importance of the use of language and framing policy through a racial equity lens.
- Working on doing away with structural racism by putting a new lens on how underwriters look at small businesses in their lending.
- Creating a repository of information on diversity, equity and inclusion that nonprofits can use when working with POC-owned small businesses and integrating DEI into their policies and procedures.
Villarreal credits the Small Business Administration for its work on PPP and the Restaurant Revitalization Fund. He would like to see the SBA transform to work more with community and mission lenders. They are currently evaluating the SBA’s proposal to lend directly for loans under $150,000.
In a perfect world, Villarreal says there would be a broad range of services for small businesses, particularly for POC-owned businesses. “How can we bring a greater array of financial services that, right now, are only given to the one, five or ten percent of businesses in this country, but we give them to the other 90 or 95 percent?” This includes relationships with and resources from financial institutions. “If they have access to those, we can help our small businesses grow and create wealth for themselves.” He added that POC small businesses in concentrated diverse areas hire people from their community, creating a stronger local economy.
Even though there is much work to be done, Villarreal is optimistic. “We were very impressed with the resiliency of small businesses.” He added, “To our surprise, folks have been able to keep the doors open and be creative with what they’re doing.”
To participate in the discussion about the best ways to invest and support POC-owned small businesses and other topics important to California, attend the California Economic Summit. You can register here.