Data says minority businesses taking a harder hit in pandemic
Analysts worry the COVID-19 era could undo their recent growth
Brian Holmes’ construction business is doing all right for now. It’s next year he’s worried about.
His company, B&D Contractors, was being considered for projects that are now in limbo, the coronavirus pandemic casting a cloud of uncertainty over the economy.
“I’m thinking it has to do with COVID-19 that developers are a little skittish right now,” he said.
His New Berlin-based company was going to work on historic windows for the redevelopment of the Milwaukee Athletic Club downtown, a project that stalled when the pandemic hit.
“Now all of a sudden, we don’t know where that’s going,” Holmes said. “Nothing’s for sure until we get a contract.”
Developers changed course when the pandemic upset the hospitality industry, dropping plans to turn the historic building’s upper floors into a boutique hotel, the Milwaukee Journal Sentinel reported. Now, the plan is to turn them into apartments.
Stalled projects like that are what’s keeping
Holmes from bidding on 2021 work. The problem is the uncertainty. If he has time blocked off for a project that gets delayed, he doesn’t want to commit to multiple other projects at the same time.
“When you’re a small minorityowned business with a small crew, you can’t overbid because you don’t want to overextend yourself,” said Holmes, a member of the Bad River Band of Lake Superior Chippewa.
In recent years, Native Americans and other minorities, underrepresented among entrepreneurs, have made gains in business ownership, but some economists and analysts worry the economic slump caused by COVID-19 could undo that growth.
COVID-19 cases have been surging across the state and the country, putting the brakes on an already fragile economy and dimming hopes of a V-shaped recovery.
Minority-owned small businesses will likely have a harder time surviving a sustained economic downturn than non-minority ones, said Joseph Parilla, a fellow with the Brookings Institution in Washington, D.C. The challenges such businesses generally face include being smaller, having less cash on hand and facing more barriers to capital.
Bill Beson, a member of the Lac du Flambeau Band of Lake Superior Chippewa, is senior loan officer for First American Capital Corp., a nonprofit financial institution that provides loans to Native American-owned and other minority businesses.
Most of their borrowers have seen a downturn in business, he said.
“We haven’t had any (borrowers) that have said, ‘You know what, I’m done. This was the nail in the coffin,’” he said. “But we’re also realists. We know there’s a long way to go here. The economic recovery is going to be much longer than most anticipated.”
It’s hard to tell exactly how the impact on minority businesses compares to non-minority ones because of the lag in data measuring business ownership, said Parilla, of Brookings. But he pointed to early evidence that minority businesses have been hit harder by the pandemic.
Robert Fairlie, an economics professor at the University of California-Santa
Cruz, found the most “dramatic” drops in working business owners were among minorities.
His working papers did not include numbers on Native American business owners, but he found about 40% fewer African American business owners were working in April than in February. For white business owners, it was about 17% fewer. Latinos and Asians also experienced larger drops in working business owners, though they weren’t as sharp as for African Americans.
In May, there was a slight rebound, but minority business owners were still more likely than white ones to be inactive.
The uncertainty is what worries Holmes, of B&D Contractors, the most. Some projects have been postponed, and he doesn’t know whether they will move forward or when.
“It’s just the fear of the unknown because now you’re seeing all of these spikes going on through the country,” he said.
As a construction contractor, his business hasn’t been hit as hard as those in the leisure and hospitality sector, a contrast to the Great Recession more than a decade ago when construction was among the most devastated.
“We’re considered essential workers in construction,” he said. “So the projects that we have under contract, we’ve still been fulfilling those contracts and continuing to generate revenue . ... We’re still in the black.”
His business also received a loan through the federal Paycheck Protection Program designed to help small businesses affected by the pandemic cover payroll, rent and utilities.
But for minority-owned businesses in harder-hit sectors, or ones that don’t have a relationship with a bank or a lot of wealth, they may have a harder time surviving.
That’s where nonprofit lenders like First American Capital Corp. come in; they exist to help underserved communities.
“We worked very hard to get money into the hands of businesses because they needed it quickly,” said Beson, the senior loan officer at First American.
First American did not participate in the Paycheck Protection Program, but it did use state programs funded by the federal CARES Act to provide relief. Through the state’s Small Business 20/ 20 program, it helped nearly 40 of its borrowers make payroll and rent payments for two months during the pandemic, said Gary Mejchar, assistant director at First American.
The lender also helped small businesses obtain micro-grants of $2,500 that the state was offering to businesses short on cash, Mejchar said. It also offers businesses microloans of up to $50,000 with principal and interest payments covered by the U.S. Small Business Administration for six months.
Rob Pero, of the American Indian Chamber of Commerce of Wisconsin and a member of the Bad River tribe, says the need is clear.
“We’ve definitely seen an uptick in people taking advantage of these financial opportunities,” he said.
He owns a business, a digital marketing company called Perodigm, located in Cambridge, that has been hit by the pandemic. Near the start of the pandemic, he lost some clients when those clients had to slow or shut down their business and put a hold on advertising, he said. But he says Perodigm bounced back once clients realized the pandemic was not going away and that they needed to build up their digital presence.
He was also trying to open a new business when the pandemic hit. The pandemic delayed the opening of Ripley Green, a shop that sells CBD products, by a few months; he said it has been “limping along” for now.
“We have had some success, but there’s no way to measure where we would’ve been in a normal year and how well we could’ve done,” he said.
Sarah Volpenhein is a Report for America corps reporter who focuses on news of value to underserved communities for the Milwaukee Journal Sentinel. Please consider supporting journalism that informs our democracy with a taxdeductible gift to this reporting effort at JSOnline.com/RFA.