Last week, the Bipartisan Policy Center proudly hosted the third in our series of events, Saving Small Business. With an outstanding group of panelists, this discussion focused on the topic of “Supporting Business Owners of Color and Their Communities.”
Below is a full recording of the event as well as annotations regarding specific clips for each speaker and different issues. The robust discussion covered a range of topics, starting with a reminder about the uneven small business landscape that existed well before the COVID-19 crisis. Business owners of color not only had lower sales and business growth but also narrower access to the financial system. Rodney Foxworth, CEO of Common Future, pointed out that, going into this crisis, many Black and Latino communities still hadn’t fully recovered from the 2008-09 financial crisis and recession.
Here are four summary takeaways from the event.
Much of the political attention and fiscal firepower in the crisis response has focused, rightly, on the dire financial situation of many small businesses. Significantly high percentages of small businesses lack the cash reserves to get them through a prolonged period of difficulty. In the information she presented, Nancy Santiago Negron, Community Impact Lead at Ureeka and vice president of Hispanics in Philanthropy, noted that Black and Latino-owned businesses are far more likely to have smaller cash buffers.
With so many businesses running out of money, federal policy has focused on getting cash into the hands of business owners. According to survey data from MetLife and the U.S. Chamber of Commerce, that’s exactly what small businesses say they need the most.
While agreeing that money is the biggest requirement right now, our panelists pointed out that more is needed to help small businesses. As Santiago Negron pointed out, “Financial capital decoupled from strategic support, coaching, and mentoring is only going to delay the inevitable, it’s not going to change outcomes.”
James Ballentine, executive vice president of Congressional relations and political affairs at the American Bankers Association, raised concerns about the additional debt—through expanded loans and loan guarantees—that many small businesses are taking on. This could have negative long-term effects. As Ballentine noted, “I am very concerned about businesses being strapped with too much debt—it is not going to help them. It will help them short-term; it will not help them long-term.”
The money that has been authorized by Congress to help small businesses—through the Paycheck Protection Program (PPP), Economic Injury Disaster Loans, and more—has been structured as loans through financial institutions.
Mostly ignored in the response, however, have been entrepreneurial support organizations (ESOs). As Foxworth pointed out, these are usually the “first line of defense” for entrepreneurs and communities, the first place they turn to for information and guidance. They represent a “relational infrastructure” that can help drive resources and capital to diverse groups of business owners.
These ESOs are critical because of their credibility and trust. Yet, as Santiago Negron observed, many are nonprofits and may not be coming back after the crisis. This leaves yet another gap in the effort to support small business. Public and private organizations should incorporate ESOs into their recovery efforts. As Tom Sullivan, vice president of small business policy at the U.S. Chamber of Commerce, highlighted, some elements of PPP are “forcing the creation” of new relationships—a new relational infrastructure—at, for example, community financial development institutions. These will turn out to be critically important in future rounds of support.
For communities of color, according to Foxworth “business ownership is actually the primary driver for wealth creation and lowering, mitigating the racial wealth gap.” Current demographic trends, too, point to the critical importance of helping business owners of color not only survive but also thrive.
Republicans and Democrats in Congress have agreed on the need for a rapid policy response and have authorized trillions of dollars in government aid in only a matter of weeks. Our panelists pointed out that we need think in terms of not just recovery but restructuring. Current systems of financing and business support and public policy have not altered racial and ethnic inequities in business ownership and success. Relying on those systems for response, said Santiago Negron, is as if “we’re running out to buy a smoke detector when the house is on fire.”
Sullivan framed this restructuring in terms of a “simple” issue that government at levels will need to address. “You either make a decision that is going to reward a business to restart, or to punish the business that restarts,” he said.
Even as political disagreements arise about the next phases of government response, the panel’s discussion about restructuring points toward a potential area of bipartisan agreement. Every part of the United States, including communities of color, will need new businesses starting and growing. They’re needed to fill the hole of businesses that closed or failed because of the crisis; they’re needed to provide jobs and mobility and income.
For the last decade, new business creation has been stalled in the United States—we faced a “startup deficit” even before COVID-19. And, significant disparities existed in terms of business ownership and performance. Going back to the systems and structures that existed pre-crisis will not meet the entrepreneurial needs of the post-crisis era.
- Overview of the state of business owners of color:
- 8:37-9:47 (Santiago Negron)
- 9:48-13:11 (Santiago Negron)
- 13:12-14:34 (Santiago Negron)
- 14:35-16:08 (Santiago Negron)
- 17:49-18:59 (Foxworth)
- 19:06-20:09 (Foxworth)
- 37:28-39:33 (Ballentine)
- On the challenges posed by the current system
- 21:23-22:00 (Foxworth)
- 52:13-57:06 (Foxworth)
- 33:20-36:30 (Ballentine)
- On PPP, the Federal Reserve, and other policy responses
- 26:55-28:29 (Sullivan)
- 58:43-60:11 (Ballentine)
- On CDFIs and minority depository institutions
- 42:56-44:22 (Santiago Negron)
- 28:31-31:00 (Sullivan)
- 31:01-32:46 (Sullivan)
- 63:51-66:27 (Sullivan)
- On the role of entrepreneurial support organizations (ESOs)
- 44:23-45:23 (Santiago Negron)
- 20:17-21:22 (Foxworth)
- 22:01-24:06 (Foxworth)
- Overview of Ureeka and partners
- 45:24-48:32 (Santiago Negron)
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