Kizzy Williams, the owner of Allie B’s Cozy Kitchen, still remembers preparing to open her restaurant six years ago: She scrubbed the stove, stored food and relied on a network of customers and employees to keep her business afloat. Because of the pandemic, she now she feels like she’s starting over.
The Clinton Avenue restaurant, which has in-person dining but mainly provides catering for local colleges, has lost most of its customers because no one is hosting events. So she and her wife struggle to maintain the restaurant while caring for her 15-year-old son, whose school closed months ago.
Small businesses across the U.S. have been disproportionately affected by COVID-19. And minority and female owners, like Williams, have struggled more than their white competitors to receive federal aid, as reported in April by the Federal Reserve Bank of New York.
At a House Subcommittee on Diversity and Inclusion hearing last week, U.S. Rep. Joyce Beatty, D-Ohio, said the Coronavirus Aid, Relief, and Economic Security Act and the Paycheck Protection Program, which Congress passed in April, have not provided enough financial relief for these businesses, which are already two times more likely to be considered in distress.
“Minority- and women-owned businesses face numerous, unique and disparate barriers to market entry,” Beatty said at the hearing. “Small businesses have experienced a 22% closure rate as a result of the COVID-19 pandemic from February to April of 2020 — but the closure rate for minority-owned businesses is significantly higher, with 41% of Black-owned business, 32% of Latinx-owned businesses and 20% of Asian-owned businesses closed over the same period.”
Cheyenne Simmons, the owner of Great Exbaketations Bakery specializing in cakes, remembers calling, then meeting with a banker to apply for a loan in early March. In person, she was told the bank would only approve a loan for less than she was initially offered over the phone.
“I think a lot of that has to do with the fact that he realized I was a Black female,” Simmons said. “Maybe [he] had less confidence in me as a business owner because of that.”
Ho Kwan Cheung, a psychology professor at the University at Albany, has conducted research that supports Simmons’ contention.
“Psychologically, when we don’t see that other people match with the [white male] prototype, we’re less likely to have confidence in their success” Cheung said. “That has a lot of impact in terms of small businesses owned by minorities and women because it’s difficult to even build that first step of a relationship. It is more difficult to get a loan from banks and it’s more difficult to secure a customer base. It’s definitely harder for them to bridge collaborative relationships with other businesses that could be mutually beneficial.”
While some economists agree the CARES Act and PPP Loans are well-intentioned aid programs, it’s hard to deny business owners who have personal relationships with banks are at an advantage.
“The groups that are getting these PPP loans very quickly are firms that have a good relationship with big banks,” said Yue Li, a macroeconomics professor at the University at Albany. “Small businesses may not have gathered loans initially, but now in the second pool, they are receiving loans.”
Kristin Devoe, a spokewoman for Empire State Development, also recognized forming relationships with banks is an obstacle for minority and women entrepreneurs, but said the state is working with Community Development Financial Institutions to promote the availability of PPP loans. ESD also launched the New York Forward Loan Fund in May to support small businesses, nonprofits and landlords who did not receive federal aid.
And while big companies’ share of the federal funds dwarfs that of minority- and women-owned small businesses, those businesses appear to have collected PPP loans, either in the first or second round of distribution. Some owners, however, said the aid will not get their businesses and employees through the end of the pandemic. Ben Griffy, an economics professor at the University at Albany, said the needs of individual small businesses could be better met through direct conversation between businesses and banks.
“Minority-owned businesses tend to be sole proprietorships with very few additional employees so programs like PPP are going to be very helpful for them if they don’t have the connections to banks they need to access these funds,” Getty said. “The principle of ‘we’re going to replace payrolls’ is a good idea, but there’s no need to go through a financial intermediary.”
In June, Congress passed the Paycheck Protection Program Flexibility Act to reduce the amount of PPP money a business is required to put toward payroll from 75% to 60% and extend the covered period for loan forgiveness from eight weeks to 24 weeks. Despite applying for and receiving loans in early April, however, some minority and women entrepreneurs have already spent most of the money on loan forgiveness.
Melissa Hagan Renna, co-owner of Dutch Apple Cruises that offers food to its passengers on a boat, said her restaurant would have a different cash flow situation if she had known she’d have more time to spend the money.
“We didn’t find out [about the change] until the last week of the eight weeks,” Renna said. “If all of that information had been readily available in the beginning, it would have changed the course of how we chose to use the funds.”
COVID-19 has hit Dutch Apple Cruises especially hard. Renna’s seasonal restaurant only serves passengers from April through October, and she’s lost a third of that season already.
Simmons, a Black female entrepreneur, said it is harder for minority- and women-business owners to get the latest information and resources because most people think of business owners as white men. When she talks to her white male neighbors, who are not necessarily in business, they tell her about loans or funding programs she’s never heard of.
“I’m wondering how they are hearing about this,” Simmons said. “The biggest stumbling block is just having access and having people think of you first when it’s time for programs.”
The City of Albany Minority and Women-Owned Business Enterprise Program aims to offer exclusive opportunities to entrepreneurs who have been certified as legitimate MWBEs. However, the long procedure has stopped many business owners getting certification. Williams said it took her two years to get certified by the program.
Simmons said minority- and women-owned businesses need more help from the government, which could include offering more programs designated for minorities or women only and informing them actively.
“They need to be the ones seeking out minority- and women-owned businesses, because it’s not our job to do that,” Simmons said. “Honestly, we don’t know where to look.”