Black-Owned Businesses Face Greater Barriers To Economic Recovery

Jun 24, 2020

No group of small businesses was harder hit by the coronavirus pandemic than Black-owned businesses. A Stanford analysis of census data shows 40% of all Black-owned businesses in the U.S. closed their doors for good, and many for reasons that existed far before any health crisis.  

A few of Connecticut’s Black-owned businesses were able to beat the odds. 

Jonai Phillips co-owns The Green Room in New London. Her restaurant is only about a year old, and offers comfort food to the city’s busy waterfront cultural district. 

She says the pandemic was almost enough to drown her burgeoning bar — if not for the support of the city’s Black community and some emergency state assistance. 

"We just got the hang of it, and we had to switch it and learn a totally different way of doing it,” Phillips said. “So, we did like takeout to go and surprisingly, that's been well for us. We have a lot of support from the community.”

Restaurants in Phase Two of reopening in Connecticut have been allowed curbside takeout since May, and some outdoor dining and limited indoor service since June.

“We were a little stressed out about bills and like, back rent and utilities are crazy,” she added.

She was also able to stay afloat thanks to a loan from the state’s Minority Business Revolving Loan Program. Connecticut Lieutenant Governor Susan Bysiewicz visited Phillips last week to see the state dollars in action.

“As soon as they opened the applications for the Hartford Economic Development Corporation program, they received twice as many applications as they could honor,” Bysiewicz said. “So that's something that we're working on right now to refund because we see a huge need in the minority-owned business, small business community.”

Phillips didn’t even bother applying for federal assistance, like the Paycheck Protection Program. She said PPP loans were unattainable for Black business owners like her.

“Just being a person of color, you kind of already instilled in your head that things are going to be more difficult,” Philips said. “And you kind of have to like, go rather than just going straight, you kind of have to go around to do things.”

And she may be right. The Center for Responsible Lending found that 95% of Black-owned businesses didn't qualify for PPP loans. 

Carlton Highsmith said this is a decades-old systemic problem for Blacks, like himself. 

“I was minimized a lot, not taken seriously a lot, a lot,” said Highsmith, the retired founder of Specialized Packaging Group in New Haven, which became one of largest minority-owned businesses in the U.S. before it merged with PaperWorks in 2009.

Black owners have historically been denied loans more than any other racial group.

“Priority was given by banks to those companies that had existing relationships,” he added. “And unfortunately, Black-owned businesses don't traditionally have the kinds of relationships with banks or financial institutions that would have allowed them to access those funds.

Carlton Highsmith, founder of Specialized Packing Group in New Haven, at a business conference in the 1990s. Highsmith is now the vice chairman on Quinnipiac University’s Board of Trustees.
Credit Courtesy of Carlton L. Highsmith

Highsmith said many Black owners stake their entire livelihoods as collateral on their businesses — he had put up his house in the ‘80s and hoped that he wouldn’t lose everything in a pinch. 

Democratic Connecticut Senator Richard Blumenthal said the federal government needs to do more to get money in the hands of community banks that have better relationships with Black owners — though any additional funding is on hold by Senate Republicans.

“That's a loss of institutions for the community, a source of jobs and service,” Blumenthal said. And the federal government ought to be doing much more for the small, small and medium-sized businesses owned by Blacks that are succumbing at a much higher rate to this economic crisis.”

Fred McKinney is the chair of Innovation and Entrepreneurship at Quinnipiac University. (The department is named after Carlton Highsmith, who’s vice chairman on the school’s Board of Trustees.) 

McKinney said many Black owners will disproportionately face significant hurdles reopening their business.

“I think the barriers that minority Black-owned businesses in particular face in the corporate world are similar to the barriers that Black people face in other aspects of American society,” McKinney said.

Many Black businesses lack the financial resources to recover, such as bank savings, access to a line of credit, or the ability to borrow from family and friends.

“Some of that has to do with just outright discrimination and the history of racism and white supremacy in the country,” he added. “But also some of it has to do with the effects of that white supremacy and discrimination on the establishment of Black-owned businesses that have the capability to do business.”

And he says that has become clear in the recent Black Lives Matter protests seen around the country. Social media has fueled policy changes to prevent police brutality, but also support for minority businesses.

Alisa Bowens-Mercado is the first Black woman in Connecticut to own a beer company.
Credit PhotoGrid and IMG

“Black Lives Matter. Black businesses matter, you know, we want the country to know that we're, we're here, we're involved, we want to be a part of the economic piece of the fabric of this country,” said Alisa Bowens-Mercado, founder of Rhythm Brewing Company in New Haven, and the first Black woman in the state to own a beer company. 

“We have to work twice or 10 times as hard and I'm a female so I'm you know, I've got to work probably 20 times as hard to get, you got to when you get your foot in the door, you know, there's extra work that has to be applied.”

That puts Bowens-Mercado in the minority of the minority. Census data shows Black-owned businesses make up 2% of the U.S. marketplace. Being a woman and a minority — in her industry — she says she feels like she’s one of a kind. 

All she says she wants is to be taken seriously and work on a level playing field.

Minority Business Assistance Programs:
PPP Loans: The Paycheck Protection Program still has $120 billion of federal funding available for small businesses through June 30. The Connecticut Department of Economic and Community Development and the state’s Women’s Business Development Center can help all small businesses — not just female-owned — navigate filling out PPP loans or other small business loans. The DECD hotline is 860-500-2333. 

HECOD: The Hartford Economic Development Corporation runs the Minority Business Revolving Loan Program. It’s a line of credit from $10,000 up to $100,000. The interest rate would be fixed at 4%. And the loan would be for a 10-year period. HEDCO has already given out over $2 million since March. They plan to expand that to $5 million.

DECD: The Connecticut Department of Economic and Community Development offers grants of up to $100,000 or a loan up to $300,000.

CommCap: The Community Capital Fund makes loans to small businesses for capital improvements and commercial real estate improvements.

CEDF: The Community Economic Development Fund issues small loans ($35,000 and under) to small businesses.

WBDC: The Women’s Business Development Council in Connecticut offers equity match microgrants of up to $2,500 to supplement investments. Funds can be used for a new project or to purchase a business asset. 

Eastern Connecticut: The Community Investment Corporation and Southeastern Connecticut Enterprise Region provides loans and guidance to small business owners.

CI: Connecticut Innovations has several grants and loans available to help small technology businesses.