For Black-owned businesses to begin to dismantle the historical disparities that have placed them at a disadvantage, they need better access to capital.
That’s the consensus among Black business owners and elected officials, and advocates.
As a starting point, access to money to do business is paramount.
“The difference between a man or woman who is an amazing neighborhood chef, the difference between them selling platters on a Friday or Saturday and owning a restaurant is access to capital,” said Rep. Jordan Harris, a Democrat from Philadelphia and member of the Pennsylvania Legislative Black Caucus. “Those resources need to be made available to folks so they can do what they are capable of doing.”
The series – Black-owned businesses: Stories of struggle and success – was driven by the stark data showing the disproportionate toll that Black-owned businesses have taken from the pandemic. Black-owned businesses have seen higher rates of forced closures, defaults and fallout from the economic downturn
To end the series, we turn to stakeholders to explore ongoing and additional steps to address long-entrenched systems.
Many say aggressive public policy and public funding must play a role in dismantling those entrenched and systemic practices.
“It’s not that I‘m not happy about the CARES Act relief money,” Wheatley said. “We felt there should be a $10 billion dollar pot for all business owners and some focus on disadvantaged businesses not just to recover but to level up the playing field.”
The grant program earmarks $100 million to help historically disadvantaged businesses. Funding for the program comes from the state’s allotment of federal CARES Act. The program is being rolled out in phases and is administered by the state’s 17 Community Development Financial Institutions.
Black-owned businesses historically have had poor relationships with banks and lending institutions.
“The priority is to reach those business owners and focus on reaching historically disadvantaged business owners who typically won’t get these grants and loans. That’s one huge advantage.”
Moreover, since Black-owned businesses are overwhelmingly start-ups or “mom and pop shops” that do not have the advantage of networking and even generational legacy, it was crucial that the program, unlike the federal funding, did not present a cumbersome application process.
The demand for the funding is so great, Betancourt fears the program will run out of money prematurely.
Change the culture
“The first thing we have to do is be cognizant of what it is,” Harris said. “It’s systemic racism. Systemic racism has hindered development and support for Black businesses.”
“We look at the exceptions and try to make them the rule,” Harris said.
“It’s been engineered so well that we won’t get out of it quickly,” he said. “We didn’t get into it quickly and we won’t get out of it quickly.”
“There’s a whole economy built around the idea of keeping certain demographics at the bottom of the totem pole,” said Nelson, who shared his own experience with a bank that initially denied him a small loan, for which he was qualified.
Nelson said the business sector must re-examine how it engages with Black entrepreneurs up and down supply chains.
“I call it professional ghosting,” Nelson said. “I live it every day. You do what’s comfortable. If I’m not golfing with you, if I’m not your cigar buddy or your scotch buddy, I’m never going to see that contract.”
Betancourt calls for a strengthening of laws that would require banks to invest in low income areas. The Trump administration has, in fact, weakened those laws, starting with the Federal Reserve Bank.
Loan guarantee programs are available through the Small Business Administration, but banks tend to avoid those programs, often because they entail a cumbersome process, Betancourt said.
In addition, he said, the federal government needs to play a role in strengthening Black banks and credit unions, as well as chambers of commerce. The majority of lending and networking from these institutions are directed at small and minority owned ventures in underserved communities.
Access to contracts
He said minority business quotas must remain an integral part of a solutions strategy, otherwise the propensity is for business to be conducted the way it has historically been done, Nelson said.
In addition to addressing contract procurement with veteran-owned and small businesses, the new policies replace proposal scoring methods with a goal-setting method for state contract spending with the intent to achieve 26.3 percent of state contract spending through small, diverse businesses.
The changes were recommended by the 2018 Commonwealth of Pennsylvania Disparity Study, which examined disparities in the state’s contracting system.
“And some of these businesses are going to be further limited. If you are a salon or barber shop or bar or tavern in the green phase and they still can’t maximize their business opportunity because of the new requirements,” Wheatley said. “You are putting them at further disadvantage.”
“Helping these businesses become thriving businesses will ultimately help communities raise tax structure and they will put more people to work,” Wheatley said. “I think there is a compelling argument for why you want to do this investment and what is the return to this investment that is very critical.”