Businesses owned by Black are found to be most affected by the health crisis, per a study from New York’s Federal Reserve Bank. It also coincided with the celebration of National Black Business Month. Published on Wednesday, the study showed the repercussion of the pandemic among businesses. It then found that most of the enterprises owned by Black are the most vulnerable.
In the Fed’s study, Black businessmen are the most affected, with 41 percent drop during the coronavirus outbreak. The timeframe is between February and April—the period the COVID-19 was just emerging in the country.
It is higher than the drop experienced by Latinx businesses of 32 percent. Firms owned by Asians saw closure of 26 percent. For comparisons, those owned by White decreased by 17 percent. Overall, 22 percent of active businesses were hurt by the crisis.
The findings were echoed by similar results from an earlier study from University of California on June.
Nationwide, higher COVID incidence is more likely found in counties with higher shares of Black-owned firms and lower…
Prior financial challenges
Among the reasons for the disproportionate statistics among Black businesses include: “weaker cash positions, weaker bank relationships, and preexisting funding gaps left Black firms with little cushion entering the crisis,” the NY Fed study reads. Even before the pandemic hit, many of the Black entrepreneurs were already facing financial struggles. They are not much equipped to cope with business shutdowns among places with higher confirmed cases.
A study from last year was mentioned that found only 42 percent of firms owned by Black were “financially healthy.” Metrics included profit and net income. In contrast, White-owned businesses fared better with 73 percent.
Coverage and closures
In addition, federal programs also “left significant coverage gaps.” The authors found the PPP to only reach 20 percent of eligible businesses among places where there is high volume of Black business owners.
According to one of the study’s authors Claire Kramer, assistant VP of the New York Fed, stated: “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.”
Closures among Black-owned firms are higher as they are more concentrated on places with higher infection rates. In turn, it is more likely their business would see few customers as stricter protocols and restrictions are in place.