Disparity noted as firms close

Study: Black-owned small businesses more likely to shut

Black-owned small businesses are twice as likely to close as small businesses overall during the coronavirus pandemic because they suffer from preexisting vulnerabilities, according to a study released Tuesday by the Federal Reserve Bank of New York.

Data shows a 41% drop in the number of active small-business owners who are Black from February to April, compared with a 22% drop in owners overall, according to the study. Hispanic business owners fell by 32%. Asian business owners dropped 26%, and white business owners fell by 17%.

The reasons found by the study include a concentration of Black businesses in counties hit hard by covid-19, weaker financial cushions and bank relationships, and the uneven reach of the government’s Paycheck Protection Program.

“This tells us that a more targeted geographic focus on the hardest-hit and most underserved places is needed,” said Claire Kramer Mills, assistant vice president at the New York Fed. “The racial disparities in bank relationships prior to covid-19 detailed here raise structural questions about the presence and functioning of banks in communities of color.”

The economic effects on the coronavirus pandemic have hit small businesses especially hard, with Yelp Inc. data indicating that more than half of the business closures that were temporary at the beginning of the pandemic are now considered permanent. The Paycheck Protection Program, a loan program designed to provide relief for small businesses that is set to expire Saturday, has faced criticism of uneven loan distribution that favored majority-white parts of the country.