A national study on coronavirus aid for small businesses led by University of Michigan researchers found that Black business owners were about 30 times less likely to receive government assistance than white business owners since the pandemic began in March 2020. The study was led by Felix Kabo, an assistant research scientist at the Institute for Social Research’s Survey Research Center. 

In March 2020, Congress passed the $2.2 trillion dollar coronavirus relief bill (known as the CARES Act) in an attempt to help working families, small businesses, people paying off loans and a health care system staggered by COVID-19. The bill gave over $600 billion to businesses, states and other municipalities without much instruction on how to distribute it, leaving workers unsure of how to collect unemployment benefits. 

The University’s study was nationally administered from May through June 2020 and surveyed approximately 6,300 small business owners and entrepreneurs from around the country. The business owners were asked whether or not they had received government aid between March and May 2020. While 6.9% of the total number of entrepreneurs surveyed reported receiving federal aid, only 0.3% of Black entrepreneurs said they received money from the government. 

The study does not examine why this disparity between Black-owned and non-Black-owned businesses occurred. However, in an interview with The Michigan Daily, Kabo said he suspected that pre-existing barriers and unequal access to credit might contribute to Black business owners struggling to receive funding. 

“I’ve looked at work that’s emerged that’s showing a phenomenon where business owners and entrepreneurs were much more likely to receive stimulus funds when they had pre-existing relationships with financial institutions,” Kabo said. “A Black business owner or entrepreneur is … less likely to get credit, and if they do, they are more likely to be charged higher interest.” 

Kabo said Black-owned businesses are often denied loans because they sometimes lack the financial and accounting structures necessary to receive, process and account for stimulus funds. 

Many Black business owners in Washtenaw County expressed similar frustrations with accessing financial relief due to bureaucratic and systemic obstacles. In the fall, a group of local business owners created the Association of Businesses of Color to provide aid to businesses run by people of color. 

Melvin Parson, the executive director of We the People Opportunity Farm, a nonprofit farm based in Ypsilanti that mainly employs formerly incarcerated individuals, said there are a lot of bureaucratic obstacles that grassroots organizations and nonprofits face when trying to receive grants. 

“The more you can cut out the bureaucracy, the better off things will be in terms of money getting to organizations that have the potential to really make an impact,” Parson said. “And (money won’t) just make it into the hands of the few organizations that are able to dot their i’s and cross their t’s.”  

Brian Jones-Chance, co-founder of the 734 Brewing Company in Ypsilanti and one of the founders of the ABC, said while he applied for and received Paycheck Protection Program loans as part of the CARES act, he has seen firsthand how many Black-owned businesses struggle to access financial aid. Like Kabo said, the lack of relationships between Black business owners and financial institutions deters some businesses from even applying for aid, Jones-Chance said.

“We are finding that one of these issues is not having those banking relationships,” Jones-Chance said. “You just go and you deposit your money, you maybe run your payroll through there, but there’s no actual personal relationship.” 

Other local Black business owners said they chose not to apply for coronavirus aid because they weren’t sure exactly what it entailed. Robyn McCoy, a partner at McCoy and Associates, a law firm in downtown Ann Arbor that specializes in estate and trust law, chose not to apply for the PPP because she found it unclear whether or not the program functioned as a loan or a grant.  

The PPP provided loans to small businesses during the COVID-19 pandemic, though it was initially unclear whether it would be classified as a grant or loan when filing taxes. The CARES Act, which the PPP is part of, also includes programs for small businesses grants, such as advance payments for the Economic Injury Disaster Loan program. 

In an email to The Daily, McCoy called for greater education on the state, local, and national levels to increase transparency in the aid process.   

“There were concerns because it was set up as a loan and I’m not eager to incur any more debt,” McCoy wrote. “I wouldn’t rule out possibly applying for something in the future, I would just want it to be clear — that if it’s a grant then it says it’s a grant.”   

Janice Johnson, the owner of Clothes Mentor Ann Arbor, said the responsibility of providing aid to small businesses should be shared by local, state and national governments. She said there were local grant opportunities that could have prevented her from having to use personal savings to pay her bills that were not well marketed.

“There were other grants available that I missed out on that have since expired,” Johnson said. “So even if Ann Arbor did handle it directly, how would they spread the news that these (grants) were available?”

Kabo proposed several solutions to the disparities between white and Black business owners' access to aid. He said local governments in Pittsburgh and Cincinnati have begun initiatives to provide critical funding for debt financing, such as using government agencies to provide information to businesses owned by people of color. These strategies can be adopted in Ann Arbor and by other local governments across the country, Kabo said.

Music, Theatre & Dance freshman Maya Boyd, whose father owns Boyd Beauty in downtown Ann Arbor, said it was more important to support local Black-owned businesses rather than large-scale corporations. She encouraged U-M students to explore Black-owned businesses outside of campus and around Ann Arbor. 

“I think that students have a lot of knowledge on how to spread information and support people,” Boyd said. “(They can help) just by going and exploring other businesses that aren’t the classic white-owned businesses and corporations.” 

Daily Staff Reporter George Weykamp can be reached at gweykamp@umich.edu.   

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