The Black community has disproportionately been affected by the coronavirus pandemic — and now a new study conducted by the New York Federal Reserve confirms Black businesses are in deep trouble. The study finds that Black-owned businesses have closed at nearly twice the rate that all other businesses have, amid the coronavirus pandemic, citing poor financial footing, less access to federal aid, and longer closures as likely culprits.
“Between February and April, 41% of Black-owned small businesses closed, the study released Tuesday found. In comparison, all firms declined 22% in the same timeframe, while Latinx owners declined 32%, Asian owners fell 26%, and white owners decreased 17%,” Business Insider states.
Assistant VP of the New York Federal Reserve Claire Kramer Mills explained in a statement, “These firms had weaker financial cushions, weaker bank relationships, and preexisting funding gaps prior to the pandemic. 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.”
As mentioned, Black businesses were less likely to receive federal aid such as the Paycheck Protection Program, due to “weaker” bank relationships. “The racial disparities in bank relationships prior to COVID-19 detailed here raise structural questions about the presence and functioning of banks in communities of color, questions that have heightened significance when banks are relied on to administer federal, taxpayer-supported relief programs, as is the case with PPP,” the study states.
“In some counties with high concentrations of Black-owned businesses, PPP loans were received at rates much lower than the 17.7% national average, according to the New York Fed,” Business Insider goes on to explain. “Only 7% of firms in the Bronx, New York, received PPP loans, along with 11.3% of firms in Queens, New York; 11.6% of firms in Wayne County, Michigan; and 12.2% of firms in Prince George’s County, Maryland.”
See the New York Federal Reserve’s full findings here.