Black small business owners are really suffering in the current crisis. Some surveys predict that more than 40% of such enterprises will be forced to close.
Now, a recently released report from small-business platform HelloAlice confirms the desperate financial situation many Black-owned ventures face. Called The Impact of COVID-19 on Black Business Owners, it underscores the need for funding to help Black entrepreneurs survive. For example, 77% say they need emergency grants immediately. “The absolutely critical need for emergency cash flow is the number one issue we saw in this report,” says Hello Alice co-founder Elizabeth Gore.
HelloAlice, a startup itself, has a platform aimed at “helping the new majority launch and run small businesses,” says Gore. About 30% of the enterprises on the Hello Alice platform are Black-owned.
A Need for Government Support
The report focuses on a subset of around 100,000 entrepreneurs who applied to an emergency grant program Hello Alice launched March 26; it closed July 16. With funding from Silicon Valley Bank, eBay Foundation, Stacy’s Rise Project, UBS and Visible, recipients were awarded $10,000 grants. In addition, a portion of those grants were given to Black business owners. (Support for that effort came from Visible and Stacy’s Rise Project).
The report, with data from earlier this year, found that 36% of Black-owned businesses are having difficulty securing capital or a loan and 18% need $25,000 to $50,000 in capital for their business to survive the Covid-19 crisis. As for government support, 91% of Black entrepreneurs require emergency grants, 64% need long-term grants and 49% want rent assistance.
Those responses are even more alarming in light of data released in July by the Small Business Administration about Paycheck Protection Program recipients. Of the 14% of businesses that identified their race in their loan application, Black-owned businesses received 1.9% of loans vs. 83% for white-owned businesses.
While one possible explanation is that many Black entrepreneurs lack existing business relationships with banks, “There’s a whole lot of things we don’t know about what lies behind those numbers,” says Preston James II, co-founder and CEO of DivInc.
Building an Infrastructure
The report makes several recommendations: an extension of government programs helping with rent relief, tax deferrals and tax waivers, along with more $10,000 to $50,000 loans and grants. Plus it calls for industry-specific groups to step up and reach out to Black business owners.
Just as important, according to James, is forging an infrastructure of programs providing Black entrepreneurs with access to mentors and networks. “We need to build an ecosystem across the board,” he says. “I can write you a check all day long, but wouldn’t it be better if I could also provide you with advisory support and point you to the right resources for getting financial management expertise.”
Hello Alice also launched a Black-Owned Business Resource Center to compile resources, how-to guides and a directory of Black-owned businesses in the U.S..
According to Gore, she got the idea of surveying applicants after attending virtual town halls held earlier this year with Black business owners. During the discussions, participants pointed to the need for more data about the challenges facing Black entrepreneurs.