Supporting Immigrant- and Minority-Owned Small Businesses Through COVID-19 Recovery
By: What Works Cities
Tags: Cities, Small Business, Covid 19, Covid Recovery, Economic Mobility

America’s cities have reopened to varying degrees, but the health and economic toll inflicted by COVID-19 is far from over. And, just as communities of color have been disproportionately affected by COVID-19, minority- and immigrant-owned businesses have been hit the hardest by the economic consequences of the pandemic. Over 40 percent of Black-owned businesses — as well as about a third of Latino-owned and a quarter of Asian-owned businesses — shut down in the earlier months of the pandemic, one study estimates, compared to about 17 percent of white-owned businesses.

While many small businesses have struggled to access federal COVID-19 relief, getting funding has been particularly challenging for minority-owned businesses that often lack access to capital even during good times. In its newest COVID-19 relief package, announced on December 21st, the federal government set aside $40 billion for small businesses with 10 or fewer employees or for smaller scale loans in low-income areas, but even with this potential financial help, small businesses face a serious threat to their survival, especially in majority-Black and -Hispanic communities, where most small businesses don’t have enough cash reserves to stay afloat beyond a few weeks.

From Opportunity Insights’ real-time Economic Tracker

In fact, as of late November, the number of small businesses open was down nearly 30 percent compared to January 2020, according to data from Opportunity Insights.

What can cities do to help?

Cities, however, aren’t powerless to help. Municipal governments are uniquely positioned to serve as pillars of stability for minority-owned businesses. They have in-depth knowledge of the diverse needs of the local business community and can provide access to critical financing, whether by distributing municipal resources, acting as a bridge to other local funding sources, or alleviating the need for direct capital. Most importantly, city halls can use the data at their fingertips to pinpoint the community’s specific challenges and use the mechanisms at their disposal to address the immediate needs of residents and businesses.

Given the urgency and lack of sufficient federal relief for small businesses, it’s important that city staff continue to develop a hyperlocal strategy for financial support. By leveraging data, community outreach, and partnerships to deepen their understanding of the specific needs of every block, community, and business in need, cities can take a surgical, tailored approach to provide the most effective solutions and support.

As the economic impact of COVID-19 continues to wreak havoc on small businesses, particularly immigrant- and minority-owned businesses, here are some key actions city leaders should explore when developing and administering a plan to equitably assist the local business community.

1: Use local data to determine who needs assistance the most.

As a baseline, cities must understand who has had access to federal CARES Act funding, as well as state, local, and private assistance. Because federal demographic information on who has sought and received assistance from the CARES Act or private foundations isn’t available, cities need to do the next best thing to understand who has — and hasn’t — gotten relief: turn to their own data. In most cities, the data tells the same story: low-income and minority communities are failing to get the assistance they need.

Here are some data points to consider reviewing on a continual basis to help inform your approach to serving small businesses in these communities:

What census tracts or zip codes are considered distressed?

What’s the demographic makeup of these communities, including languages spoken?

What types of businesses and community organizations are in these areas?

In addition, as cities continue to reopen, consider doing a walkthrough or drive-through of these neighborhoods to see how businesses are doing. With such information, governments can better understand which businesses are facing the greatest hurdles to staying open and create strategies to support those most in need.

Example: Charleston, SC The City of Charleston began conducting on-the-ground vacancy checks and reviewing business license records to create a report on what types of businesses have closed.

2: Conduct an inventory of small business resources in your community.

At a time of scarce resources, it’s critical that cities assess their various relief efforts to ensure the assistance is working and reaching the communities most in need. Many cities have mobilized resources to help small businesses and are sharing what’s available on their websites.

Conducting a program inventory and deep-dive data analysis may seem too time- or resource-consuming given the urgency. Yet it’s a critical step to ensure that you’re not only reaching the right communities, but also providing the most relevant and helpful resources.

By asking the right questions to understand what governmental and non-governmental programs exist within the community, and whether they are effectively serving the communities with the greatest need, cities can gather the information they need to best deploy additional support and resources. In addition, city staff may want to take stock of how they are defining and tracking success in supporting small businesses and to test the assumptions that were made prior to launching local COVID-19 relief efforts.

Working in partnership with community groups, city staff can use this information to play a critical role in helping businesses navigate the whole range of financial options and avoid falling victim to misinformation, scams, or predatory lending.

Example: Minneapolis, MN Engaging with 200 residents, entrepreneurs, lenders, and other community members, the City of Minneapolis’ Innovation Team consistently heard that similar to national trends, access to capital presents a major challenge. Looking deeper into the city’s own program, the team determined that a major hurdle for small businesses to access funding was a requirement that they raise matching funds from private lenders. Because they couldn’t change the city loan parameters, the team worked with a former banking executive to create a new local lender, Fortis Capital, to provide private funding. Read: Banking on the Success of Minority-Owned Businesses in Minneapolis.

3: Speak (virtually) with the community — feedback is critical.

Data can tell you where aid is going, but not necessarily whether everyone’s needs are actually being met. While in-person visits aren’t always possible, cities can meet virtually with community members to gain a better understanding of how their business operates, whether they are taking advantage of assistance programs, and what’s missing — information that no amount of online research can reveal. It may seem challenging to do community canvassing in a time of social distancing, especially with some communities lacking easy access to digital means of communications. But there are multiple ways to remotely engage specific communities and secure the detailed local information you need.

[For cities looking to meaningfully engage residents in a virtual environment, check out our recent series on remote community engagement.]

Given the acute needs of the community amidst the crisis, it may be tempting to rush forward with a solution. But listening to community members is a critical step to ensure that the feedback reflects input from not only Main Street businesses, but also a broader representation of the local community — from community boards and local groups (advocacy organizations, faith groups and community development financial institutions (CDFIs)) to experts on accessing credit locally (bankers, accountants and tax preparers).

Here are some possible issues to cover when conducting community outreach:

What are the main concerns among small businesses, including the state of the local economy and the ability to access financing and reopen businesses?

What types of home-based and informal businesses operate undetected, without showing up in Internet searches or business licensing records?

Where are community members going for financial advice and assistance?

Example: Charlotte, NC The City of Charlotte’s Small Business Community Recovery Task Force created the Open for Business program following a listening tour that revealed the need for local solutions and help with branding and marketing. Charlotte used the feedback and CARES Act funding to develop a holistic strategy to support small businesses through the pandemic and recovery.

4: Identify and leverage local partnerships when developing a financial assistance strategy.

Cities have unparalleled knowledge about the needs of small businesses in their community, but addressing the impact of COVID-19 takes the whole village. Partnering with a wide range of community groups can help ensure that the most vulnerable businesses understand what assistance is available and how to gain access to the resources they need. For example, as we continue to work with cities in the WWC Economic Mobility initiative on advancing economic mobility for their residents, we witness everyday the importance of partnerships and collaboration to address the needs of the community.

If your city is coordinating with local development organizations — such as a Small Business Development Center, Women’s Business Center, or Minority Business Development Agency — these programs were allotted additional resources under the CARES Act and may have capacity for targeted outreach and assistance.

Another way cities can use local partnerships to support minority-owned businesses is to ensure that every group has language access to critical services and resources. Many cities, especially those facing furloughs, don’t have the language capacity to conduct outreach and provide assistance to all businesses within the community, including access to online resources. Many local faith-based, cultural, and community advocacy organizations can act as a bridge or translator for small businesses in need.

Example: Birmingham, AL The City of Birmingham has formed a public-private partnership, #BhamStrong, to build, link, and coordinate people, projects, and resources to strengthen Birmingham’s COVID-19 response. After surveying 650 small business owners and residents to assess their needs, the partnership designed a program to help provide solutions. Additional partners include local not-for-profit organizations, foundations, local businesses, industry associations, CDFIs, and banks. Read Brookings Institution’s case study to learn more.

5: Use your data and analysis to facilitate access to alternative funding sources.

Given that many sole proprietors and other small businesses haven’t had access to federal CARES Act funding, leveraging private funding could be a valuable resource for the local business community. Cities are facing immense financial pressures due to the impacts of COVID-19 and the lack of sufficient federal funding. If funding is available through either public or private sources to aid in economic recovery, it is important to consider different relief funding structures. Cities can be a key convener of resources to ensure that businesses get the money they need to survive.

Here are some considerations in developing alternative financing:

If you’re structuring a grant or loan program, design it in a way that ensures access for the most vulnerable businesses. For example, cities could prioritize access to specific communities, since most financial programs are available on a first-come, first-served basis. Or a portion of the funding could go toward businesses located within high-need census tracts. Also, make sure grant and loan applications are available in the relevant languages.

When determining the funding criteria, lean on city data to determine which businesses are in need and how to best structure the financing.

Work with city staff and the community to determine the appropriate role for the city. Should you close funding gaps for businesses that may not have access to traditional disaster relief? Should you supplement relief funding? Or act as a bridge until federal relief arrives? Clarifying the city’s role will help eliminate barriers and streamline assistance to those in direct need.