State should do more to support Black businesses
Black businesses receive minimal guaranteed government loans
Tanu Henry California Black Media | 10/8/2020, midnight
Most small businesses in California are very small. A whopping 95 percent of them are companies with less than 50 employees, according to the Public Policy Institute of California. Yet these businesses employ a majority of workers in the state – up to an estimated 75 percent of the labor force.
But, for most official purposes, California defines a small business as a company with up to 750,000 employees. They span a range of sizes and budgets. They can be multi-million-dollar outfits, or companies with a handful, or hundreds, or even tens of thousands of employees. Many of them are even publicly traded.
Among African-American small businesses, though, companies with only one employee – who is the owner and operator – make up 95 percent of Black businesses across the United States. The trend in California reflects that number, too.
“If you look at the numbers over the last four decades, it is clear that Black businesses in California have been gripping on to the short end of the stick,” said Walter Hawkins, senior research associate at NewHawk, a Rialto-based consulting firm specializing in demographics and policy analysis.
“The vast majority of them are sole proprietorships. And when it comes to federal and state guaranteed loan programs, like the ones the California Infrastructure and Economic Development Bank, commonly called I-Bank, administer, only a small percentage of Black businesses qualify for, or receive, that money,” Hawkins continued. “Black-owned businesses in California received 30 of 259 I-Bank loans in fiscal year 2018-19.”
So, as the state of California takes steps to shore up small businesses whose bottom lines have plummeted since the COVID-19 pandemic began, some Black businesses leaders are concerned. They say some proprietors among them might be under informed about what the state is doing to help small businesses, or they might be locked out of state funding and support programs because they don’t have the resources or the capacities—or they might just not meet the requirements to access financial assistance.
Because so many Black businesses are sole proprietorships, advocates also say they might be too busy trying to keep their head above water to stay informed about opportunities available to them. And because many of them do not have accountants, financial advisors, marketing staffs or lawyers on hand to focus on business development goals, many of them do not know the steps to take to connect with business support programs or to secure loans or other monetary assistance.
“Unfortunately, African-American small business owners have been so negatively impacted by past and present racism, prejudice and bigotry, that even legislation that is intended to help, ignores these issues,” said Jay King, president of the California Black Chamber of Commerce.
King added that there was a time, dollars in African-American hands circulated 100 times before they left the Black community.
“That is no longer the case,” he says.
In August, the California Office of the Small Business Advocate (CalOSBA) launched a program called “Get Digital CA.” It is an e-commerce partnership with large California-based tech companies like eBay, Google, Instagram/Facebook, and others. It is designed, CalOSBA says, to connect small businesses in the state to technologies and equip them with the capabilities that are necessary to compete and survive in our local, state and national economies that are increasingly global and digital.
“This initiative will give our small businesses the extra help they need to go from surviving in a digital marketplace to thriving,” said Isabel Guzman, CalOSBA’s Director. The department that Guzman leads is part of the Governor’s Office of Business & Economic Development (GO-Biz).
“California’s small businesses are an indomitable force, tirelessly working to pivot and address the ever-changing challenges during the COVID-19 pandemic,” Guzman continued.
Then, in September, Gov. Newsom signed a bill that created a $100 million hiring tax Credit for small businesses in the state. The authors of Senate Bill 1447, Sen. Steven Bradford (D-35), Sen. Anna Caballero (D-12), and Assemblymember Sabrina Cervantes (D-60), say the legislation “expands California’s assistance programs for small businesses during the COVID-19 pandemic.”
Salena Gomez, President of the California Black Small Business Association says she applauds the governor and legislature for passing SB 1447. It is a step in the right direction, she says, but more needs to be done to address the specific needs of Black-owned small businesses.
“California should continue to work on innovative ways to help the other 95 percent of businesses where the owner is the employee,” she said. “Failure to attend to the needs of these business owners, who face a number of barriers that impede their ability to grow their businesses and employ others, will contribute to the ever-growing wealth gap that bills like this are designed to close.”