By: Jessica Bonsu
Businesses entered 2020 optimistically with plans of expansion and growth. However, those plans were dashed when the COVID-19 pandemic erupted in late March. COVID-19 forced businesses of all sizes to limit their services, furlough or terminate employees, or close down completely. Through October 2020, sales continued to drop, and entrepreneurs continued to suffer. Small Business Trends reports that COVID-19 has hit small business owners with 20 or fewer employees the hardest. These businesses were forced to find creative new ways to manage their workforce remotely and continue to deliver their products and services to customers. Both employers and employees are struggling to stay productive while balancing the increased responsibilities caused by COVID-19. While trying to adjust to public health safety measures by conducting business from home, entrepreneurs are still finding it hard to meet sales goals.
A study from the University of California at Santa Cruz reported that there were more than 1 million Black-owned businesses in the United States at the beginning of February 2020. By mid-April that number dropped to 440,000, meaning about 55% of Black business owners had closed their businesses for good. During that same period, only 17% of White-owned businesses closed. COVID-19’s disproportionate impact on Black and Brown entrepreneurs is a result of a lack of financial savings, less access to capital, funding gaps that existed prior to the pandemic, and lack of funding from the federal Paycheck Protection Program (PPP) loan, which is a business loan program established by the 2020 US Federal government Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to help certain businesses to continue paying their workers. Initially, when entrepreneurs seek out funds to start their business, they often turn to venture capitalists, traditional banking institutions, or rely on community or personal wealth. Venture capital, however, is the most common path to build a consumer start-up. Yet only 3% of venture capital funding goes to Black founders. In other industries such as non-consumer startups, most of the company’s initial investments come from the founder’s community, family, or bank. Although resources exist to help close the funding gap, those resources are only helpful if a founder has access to them. The existing disparities in funding Black businesses were only magnified by COVID-19.
With no end to COVID-19 insight, 21% of Black-owned businesses report uncertainty that they will survive the pandemic. Although Black-owned businesses have seen a sharp increase in online sales, this was due to Americans rallying to support Black-owned businesses in the wake of the murders of Black individuals like Ahmaud Arbery, Breonna Taylor, George Floyd, and many others over the years at the hands of law enforcement or non-Black vigilantes. These tragedies, fueled in many cases by videos of the incidents re-ignited the Black Lives Matter movement and lead to countless protests against systemic racism, white supremacy, and police brutality around the world. This sudden global attention on inequality in America also triggered the development of numerous online lists, Google Docs, and spreadsheets of Black-owned companies for people to support.
From May to June 2020, individuals promoted Black-owned businesses on social media. Some of these posts received hundreds of thousands of likes and shares, translating to increased sales and making some Black entrepreneurs viral sensations overnight. In June, more people than in all of 2019 opened deposit accounts with One United Bank, the largest Black-owned bank in the United States, based in Boston, Massachusetts. Even big corporations like Target and Yelp showed their support by adding a search tool to help connect customers with Black-owned businesses and providing customers with incentives for showing that they purchased something from a Black-owned business.
While it has been a boon for Black-owned businesses to receive so much funding and support from the global online community, some Black entrepreneurs, while appreciative, have nonetheless communicated mixed feelings about the sudden interest in their business. Even though the narrowing of economic inequality is long overdue, there exists a tinge of regret for these entrepreneurs that this movement was birthed by the tragedy and suffering of George Floyd, Breonna Taylor, and Ahmaud Arbery. Still, the Black community chooses to focus on the hopeful prospect. Kevin Cohee, the CEO of One United Bank remarked, “The death of George Floyd and Ahmaud Arbery focused people’s attention on using their financial resources as a way to better their community.” As the world continues to weather the COVID-19 pandemic and confront the ongoing racial injustice and economic inequity that exists in society, Black entrepreneurs nonetheless hold onto the hope that this trend of supporting Black-owned businesses is not just a trend but a movement.
Student Bio: Jessica Bonsu is a second-year law student at Suffolk University Law School. She is a staffer on the Journal of High Technology Law. Jessica received a Bachelor of Arts Degree in Political Science from Stockton University.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
