Minority & Native-Owned Businesses Face Higher Risk of Becoming Crisis Casualties

Amid the coronavirus pandemic, minority-owned small businesses are facing dramatic economic casualties, as they struggle to access pandemic-related financial relief. During the Great Recession, entrepreneurs of color were left behind. Once again, a crisis is disproportionately hammering minority-owned small businesses. 

Minority entrepreneurs are struggling with obtaining pandemic relief through federal funding and loans. Native-owned small businesses are particularly vulnerable.

Pre-Pandemic Disparities

Native American-owned small businesses were already at a disadvantage heading into the COVID-19 pandemic. Beyond the health disparities and socioeconomic factors that disproportionately plague Tribal communities, Native entrepreneurs face the added challenge of limited access to investment capital and financial education. Traditional banks won’t accept reservation-based assets as collateral for loans. Businesses located within Native communities also tend to encounter a lack of technical infrastructure and support. Economic disparities and equity challenges have only been amplified amid the current crisis. 

Even before the coronavirus outbreak, research from the JPMorgan Chase Institute drew attention to the stark contrast between cash buffer days (days the business could survive with no new revenue) for small businesses in majority-white communities versus minority communities. While statistics were not provided for Native American communities, results showed that 89% of small businesses in majority-Hispanic communities and 95% of small businesses in majority-black communities had two weeks or fewer cash buffer days. Thats compared to 30% of small businesses in majority-white communities and 2.3% of small businesses in majority-Asian communities with cash buffer days of only 14 days or less. 

Minority Businesses: Crisis Casualties  

As the health and economic crisis escalated, minority entrepreneurs have endured more challenges than the typical business owner — particularly with accessing pandemic-specific lending and relief.

A recent study by Global Strategy Group for two civil rights advocacy groups, UnidosUS and Color of Change, delivers key findings about the economic damage inflicted on minority-owned small businesses. The study highlights that 1 in 5 African American small businesses and over 1 in 10 Latinx small business owners reported temporarily shuttering due to the pandemic. Data was not provided for Native American-owned small businesses, but it stands to reason they’ve been just as heavily, if not more, impacted. 

Meanwhile a Goldman Sachs study released April 27, exactly one month ago, revealed the long-term ramifications of COVID-19 to small businesses: 68% say it will likely permanently change their business models. And that’s not even a minority-specific statistic. What really stood out were the numbers relevant to Black business owners, of whom 79% applied for a PPP loan — and only 40% were approved. Meanwhile 26% of Black business owners have less than one month of cash reserves — meaning many of these businesses are likely faring far worse right now (May 27). Considering disparities for Native American businesses are often comparable and sometimes worse than they are for the Black community, these numbers offer a glimpse into the situation for Native American entrepreneurs. 

History Repeats Itself

During the Great Recession of 2008, America similarly left communities of color behind. Female- and minority-owned businesses endured the brunt of that economic downturn. 

Minority-owned small businesses are in dire need of revenue replacement and payroll support to survive. Indian Country, in particular, needs its private sector. COVID-19 threatens Native American private economic activity — which is pivotal to job creation and fostering individual and Tribal self-sufficiency. 

The benefits of a strong private sector to Tribal reservations are innumerable, as Robert J. Miller underlines in his 2012 book Reservation “Capitalism”:  Economic Development in Indian Country. Small businesses reduce “leakage” of dollars off-reservation by providing avenues to circulate money on reservation, thus supporting Nation building and cultural preservation. As Miller states, “We need everything to capture money and leverage the multiplier effect.”