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Sun, Jul

Black-owned small businesses are still waiting on COVID-19 stimulus funds

Mark Campbell, owner of Audacity Studio in View Park-Windsor Hills. Photo by Jason Lewis

Business

Working with community development financial institutions may be the key for local businesses to obtain relief funds.

By Jason Lewis

When crisis hits, Black communities are usually hit the hardest.  Heath wise, the statistics show that Black people around the United States have a higher death rate than other races from COVID-19.  That is not surprising because Black people are more likely to have pre-existing heath issues and not as much access to quality health care.  Health issues aren’t the only concern in Black communities.  Business wise, Black entrepreneurs have been hit hard by the closures caused by the coronavirus.

“Everything has come to a complete halt,” said Mark Campbell, owner of Audacity Studio in View Park-Windsor Hills.  “We haven’t received any word about our type of business coming back, so financially it is becoming a strain and savings are dwindling.”

Audacity Studio is a men’s clothing store and salon, which is not considered an essential business.   Campbell is most concerned with paying his monthly lease during a time where he is unable to conduct business at his store.  This issue could make it difficult for him to reopen, especially if the closures stay in effect long term.

Businesses that are considered essential and can remain open are also having issues.  Joe and Celia Ward-Wallace, owners of South L.A. Cafe, said that their sales were down about 70 percent during the first couple of weeks of the closure, so they have come up with innovative ways to keep some revenue coming in.  They have been taking orders through the Joe Coffee app, which allows customers to place orders on their mobile phones and pick up the items curbside in front of the cafe.  To download the app, customers simply text “coffee” to 474747.  Hot & Cool Cafe in Leimert Park is also on the Joe Coffee app.  

Joe and Celia Ward-Wallace have also asked their customer base to support them.

“We thought about how can we sustain this if there were no people coming to our door or ordering,” Joe Ward-Wallace said.  “What we thought to do is have a three-month supporter program.  We’re asking our customers to donate $10 or more for the next three months.  We’re here for the community, and we need them to be here for us.  Let’s keep this thing going.”

Customers can text “HELPSLAC” to 38470 to donate to South L.A. Cafe.  

Small-business owners were looking for help from the federal government’s stimulus program through the Small Business Administration (SBA), but it appears that many Black-owned businesses missed out on the $350 billion.  The first wave of funds for that program quickly ran out.

The SBA’s Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan were designed for small businesses with 500 employees or less, but a major issue is that there is a massive difference between a small business that has a few hundred employees, and a small business with only a few employees.  Ninety-six percent of Black-owned businesses are sole proprietors with less that three employees, and many of them only have one employee, which is the business owner.   

Many Black business owners applied for the SBA funds online, but did not receive any money or never heard anything back from the SBA.

“We can’t compete,” Campbell said.  “They (larger companies) have the attorneys and accountants to be able to quickly get them in line.   There are more businesses like mine than those.”

Major banks managed the $350 billion, and selected which small businesses obtained loans.

“The banks targeted what we call their concierge clients,” Congresswoman Maxine Waters said on the Earl Hutchinson Report.  “These are their VIPs and high-end clients.  They created a special portal for them to make their applications.  They started getting ready for the PPP before it was launched.”

According to Waters, large corporations that have franchises, such as restaurant and hotels chains, were able to qualify by stating that their individual locations have less than 500 employees.  Waters, who is the Chair of the House Financial Services Committee, also said that about 45 percent of the $350 billion went to the “concierge clients.”

A second small-business stimulus package has been released that is valued at $484 billion.  

Navigating through the various disaster funds can be confusing to many sole proprietors who do not have a finance background.  Seeking assistance and gaining a better understanding of what the various programs are and how to apply for them can be vital to small-business owners.  

“There is a lack of financial literacy for these businesses to even be able to respond quickly enough to know which programs to go to,” said OC Isaac, SVP, Chief Credit Officer at Pacific Coast Regional (PCR) Small Business Development Corp.

Since 1977 PCR has assisted African American small-business owners in the greater Los Angeles area with obtaining loans.  They have low-cost classes and free one-on-one consulting to help people start and maintain their business.

The federal government’s quick response to the coronavirus has not helped out the smallest businesses.   

“There were a lot of guidelines around the program that just didn’t have enough time to formulate,” Isaac said.  “The program had a set launch date but a lot of banks didn’t have the required information in order to really do the program at a large level.”

Many reports showed that banks that managed these funds were being selective with which businesses received the funds, instead of distributing funds to all small businesses in need.

“If a client doesn’t have an existing relationship with these PPP-approved lenders out the gate, that client isn’t going to have the ability to potentially submit an application for approval; at least in this first wave,” Isaac said.  “That’s why there was news that a lot of lending organizations have been working with their existing clients.  I believe that has led to smaller, Black-owned businesses not necessarily being able to apply at the scale that we would have liked to see.”

PCR is a Community Development Financial Institution (CDFI), but they, along with many other alternative lenders that assist small businesses, were left out of the first stimulus package.  They did not have the ability to lend directly to their clients.  In the second stimulus package, $60 billion is supposed to be set aside for community-based lenders such as PCR.

Another problem that small business owners are having is not being aware of the various programs that they can apply for.  Many business owners have received limited information from whichever media outlet that they obtain their news from.

“You have the payroll protection program, but then you have all of these other programs that are being launched,” Isaac said  “You have programs on the state level.  It’s created a picture of, ‘what do I really go for?  What makes sense for my business?  Do I want to go for the payroll protection program, or do I need a longer working capital program like the economic injury disaster loan?’”

The Small Business Development Center at PCR provides one-on-one consulting, and they have helped local small-business owners secure funds to stay in business.

“This is a resource that works as your personal coach and personal financial advisor per se to help you think about what’s best for your business at that time based on the resources available,” Isaac said.  “And more importantly, we’re only in week three after Governor Newson’s announcement surrounding shelter in place.  These things are moving literally daily, by the hour.  New things are coming out.  New lenders are coming out to do different programs.  That advisor that small business owners will be attached to, will have the daily updates for what’s available to you.  So you don’t have to worry about weeding through misinformation or being concerned about program proportions running out.”

It’s important for small business owners to continue to do research on their own, and to also seek out guidance at the same time.  There is money out there to help, but the funds do not last long.

“Don’t wait,” Celia Ward-Wallace said.  “Try to grab whatever cash that you can.” 

For more information about PCR, contact them at (213) 739-2999, or visit their website at www.pcrcorp.org.  Click the link below for a list of CDFIs. 

http://www.cdfi.org/wp-content/uploads/2015/03/California.pdf

For more information about the Hutchinson Report, visit www.thehutchinsonreport.net