Black Businesses in the Red | When Equity Meets History
It doesn’t take any real level of scholarship to understand Mississippi has struggled with equity since it was granted statehood more than two centuries ago. That trend has continued with the state’s latest—and honestly feeble—attempt to address the disproportionate economic and social toll the COVID-19 pandemic is exacting on Black Mississippians, who represent nearly 40 percent of the state’s population.
It’s important to keep that number in mind. Forty percent. Despite the fact Black folks make up 40 percent of the population, we make up almost half of the COVID-19 cases in the state and more than half of deaths. And though we make up 40 percent of the population—of which more than half, at 52 percent, are Black women and girls—the Mississippi legislature only saw fit to carve out 17 percent of the $240 million in CARES Act relief funding for small business owners, which was codified in Senate Bill 2772. We must also bear in mind that this 17 percent was appropriated “to assist minority-owned small businesses,” which would seem, on its surface, to be positive. This so-called minority set-aside, however, effectively reduces the total amount of funding for Black Mississippians, who based on quantitative and anecdotal data are suffering the most from COVID-19.
If we accept the premise that entrepreneurship drives economic growth and is one of the keys to financial independence (thus, freedom) in the United States and, therefore, our state, Black folks are, unsurprisingly, at a disadvantage already. If ownership shares matched population shares, people of color would own 50 percent more businesses than they currently do now, according to the Brookings Institute. Put another way, the “disparity ratio”—the ratio of business ownership share to population share—is 50 percent for people of color. Similarly, women are 51 percent of the U.S. population but only one-third of business owners with employees, a disparity ratio of 65 percent.
How could this be? Is it that Black people, women, people of color, and any combination thereof are unmotivated or unequipped to start and sustain small businesses? The short and long answer is no. We can look to the percentage of loans granted by financial institutions to individuals and partnerships to provide capital for small businesses to offer an answer. The 2018 data from the Small Business Credit Survey says large banks approved about 60 percent of loans sought by white small business owners, 50 percent of loans sought by Latinx business owners, and 29 percent of loans sought by Black small business owners. The success of a business (i.e., stable, sustainable, and solvent) is correspondent to its initial investment. According to Guidant Financial, which provides financial guidance and solutions to entrepreneurs, lack of capital and cash flow are the top challenges for Black small business owners. This problem, of course, reaches as far back as Reconstruction, continued through Jim Crow, and meets us here in this current age of COVID-19.
Consequently (and again), aspiring Black entrepreneurs’ paths can be more winding and obstacle-filled. If this was the case before the novel coronavirus, imagine how much more tumultuous things might be now for those who have been able to start a business.
Findings of “The Tapestry of Black Business Ownership in America: Untapped Opportunities for Success,” a report by the Association for Enterprise Opportunity, make sense. “[S]ectors with low barriers to entry are therefore more often selected by Black entrepreneurs compared to nonminority owners, and these sectors tend to be ones that produce the smallest revenues. The concentration of Black businesses in low-revenue sectors hampers the potential of current Black-owned firms to grow and hire.”
And just as we find ourselves disproportionately underfunded with startup capital, we disproportionately populate industries that, according to the now COVID-19-stymied world, are non-essential. According to Guidant, three of the top five industries for Black small business owners are health, beauty, and fitness services; food and restaurant; and retail—all lines of work decimated by this year’s pandemic.
Still, what none of these statistics and data discuss are the hidden Black businesses that are not formally registered with the Mississippi Secretary of State’s Office, and, therefore, in a time like this, cannot seek support from the Small Business Administration or Mississippi Development Authority. Why aren’t they registered? There isn’t a brief answer to this question, but suffice it to say the traditional steps to “start a small business” either are too onerous, out of reach, or outdated for many Black folks. Even the filing fees can be a barrier that is too high for Black small business owners to overcome. Also, Black folks who may have a disability, for example, may find themselves in a precarious situation. Potential income as an entrepreneur may negatively impact their disability benefits—not enough to replace income, though enough to supplement it, and too much to report. These kinds of businesses operate on the fringes—because they are forced to, not because they choose to—and deal mostly with cash, doing a range of “essential” services from automotive repair, cleaning, and landscaping to beauty services, child care, and so much more.
These industries are also where Black women, specifically, are inordinately represented. Despite the idealized picture “The Tapestry of Black Business Ownership in America” paints about Black women business owners, it reveals the non-employer firms we own have an annual revenue of less than $25,000. That’s more than $17,000 less than the median income of $42,652 in Mississippi in 2016, when the report was released. Further, the Center for American Progress found in 2017, Mississippians who are women were fourth in the nation as the primary financial providers in our households, entrepreneurs or not; and Black women ages 16-65, eclipse our white counterparts’ participation, per capita, in the labor force with lower wages.
We Black Mississippians have largely been denied the fullness of freedom, as our ability to access capital through formal channels are constrained, the inequities in the ways state and federal funds are used to support the business community completely ignored, and tax cuts and credits to neglected investments in infrastructure and education disproportionately leave Black small business owners without the resources or recourse to build their businesses effectively.
Had legislators, in their zeal to distribute funds considered any of this, they would have recognized the potential unintended consequences SB2772 left many small, “minority” business owners—specifically Black and those who live at both the intersections of Blackness and womanhood—unable to access funds supposedly set aside for them. This attempt, at best, demands a more equitable and representative set-aside, and at worst, is a clear continuation of Mississippi’s sharecropper credit system that gives its Black beneficiaries just enough to remain underfunded, under-resourced, and under foot.
Co-authored by Natalie A. Collier and Jason O. Thompson