Black Chicagoans are suffering 4x as many COVID-19 fatalities as white Chicagoans. At the core of this issue: decades of investment segregation resulting in poor access to quality health care and other resources that has led to disproportional levels of hypertension, asthma, obesity and other health issues.
Many businesses won’t survive the pandemic. Because Black-owned businesses statistically are younger, smaller, and have much greater difficulty accessing capital – factors that are all key business “comorbidities” – we should expect the disparities we are seeing in resident fatalities to soon be reflected in business closures.
If allowed to take root, the combination of fatalities and closures will magnify existing levels of inequity, undermine the post-COVID-19 recovery of communities of color, and hamstring severely our city’s ability to recover from this crisis.
This financial dynamic is playing out in Illinois right now. Recent reports indicate that 70,000 Illinois businesses have been approved for a total of $16 billion in federal Paycheck Protection Program loans averaging $229,000. This $349 billion program is of particular value because it offers a loan equal to 2.5 months of payroll expenditures – more than the 27 days of working capital that the median U.S. small business firm holds in cash reserves – and because the portion of the loan that is used to maintain those expenditures is eligible for forgiveness.
Locally-owned small businesses on the South and West Sides of Chicago haven’t gotten their fair share. Most of these businesses are smaller and less well established than those already approved. Most have limited access to capital from any source and don’t have a team dedicated to finance. And, due to barriers ranging from historical redlining to ongoing predatory lending, most do not have a relationship with a bank certified to provide PPP loans.
Discussions that we’ve held with dozens of these business owners over the past 2 weeks reveals a different situation indeed. They are reeling from the impact of the pandemic, inundated with information, working double to keep their lights on while seeking a way forward, and unsure of whether and how to apply for a loan. As a result, most did not submit an application for PPP or for its companion program, the Economic Injury Disaster Loan.
These enterprises are among those most in need of support; however, due to the “first-come, first served” nature of PPP and the limited funds available, most were left out when the funding was exhausted on Thursday, April 16th.
Just as the pandemic has exposed the inequities in our civic society it is revealing deep rift lines within our local economies. For sure, it will worsen already tough inner city business environments.
For many community-based enterprises the lack of federal support will prove fatal.
Their closure will further damage local economies still reeling from the Great Recession. After all, these are the enterprises that provide the unique local content that attracts visitors, the spaces that are the “glue” that binds communities, wealth-building opportunities for their owners, and “first job” opportunities that are so scarce that 30-50% of Black men were jobless before the pandemic.
Congress appears poised to provide another $310 billion for PPP. However, while these funds are critically needed, they are far from being sufficient. At best, they buy our businesses time, while leaving them in the same difficult situation they were in before the crisis, with COVID-19 adding a market crash, prolonged uncertainty, and a likely seismic shift to a new normal.
We must ensure that enterprises in communities of color, not just those with the resources and relationships to be first in line, receive equal access to PPP. Financial institutions certified as PPP intermediaries must serve all enterprises, not just their current clients; stringent lending timelines and know-your-customer requirements, which can act as significant barriers, must be relaxed; and, community-based institutions must be engaged as connectors and as intermediaries.
We also must use this crisis to do more. We must re-capitalize community enterprises with additional low-cost, friendly capital and other resources, re-localize our neighborhood economies by building them from the inside out, and re-connect communities across Chicago by converting the broad virtual networks catalyzed by the pandemic to on-the-ground networks on the other side of it.
The COVID-19 pandemic represents a generational challenge to all of our lives and livelihoods. To succeed as a city, we must step up to this challenge by advancing all of our enterprises. Making sure that all of our enterprises have access to federal resources and providing enterprise-building support well beyond these dollars are critical first steps. Let’s work together to make it happen.
Bernard Loyd
Founder
Build Bronzeville
Derrick Warren
Executive Director
Greater Englewood Community Development Corporation
Calvin Holmes
President
Chicago Community Loan Fund
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