The pandemic-induced recession in Louisiana and ripple effect of restrictions has not impacted all business owners the same way. Minority-owned businesses, Black-owned businesses in particular, have been hardest hit in the past six months.
Nearly 60% of businesses in the metro area told the Baton Rouge Chamber of Commerce in a recent survey that they were negatively impacted by the coronavirus pandemic, which is more than the nearly 40% who felt the same way nationwide.
Moreover, the customer base of many community-centric, Black-owned businesses is struggling, so many of those companies are, too. Black residents in Louisiana were more likely to be unemployed before the pandemic and now are just as likely to disproportionately be out of work, according to U.S. Bureau of Labor records provided by the Louisiana Workforce Commission.
Kevin Smith, owner of The Fashion Shop, said business at his Hollywood Street clothing store in Baton Rouge has dropped 40% during the pandemic. Smith said he had to lay off a couple of employees because of the sales decline.
“It’s been pretty slow,” Smith said. “We sell hip hop clothing, and because there aren’t any sporting events, people aren’t buying clothes to wear to games or for outings at clubs and bars.”
While Smith has been able to get Paycheck Protection Program funds and an economic injury disaster loan from the U.S. Small Business Administration that have helped his store, he said the problem is people don’t have the money right now to buy new clothes or shoes.
“I feel like instead of helping out the businesses, they need to help the buyers,” he said. “If people get money, they’re going to spend it. The issue is they don’t have the extra money to spend right now, so it’s either get food or clothes.”
About 25% of Black-owned businesses said they had enough cash on hand to survive at least a month without generating revenue compared with 57% having enough cash in the bank nationally. That means 75% of respondents in Baton Rouge do not have enough cash to survive another coronavirus-related economic shutdown.
Sometimes the issue for Black-owned businesses is that the business model may not reflect products in highest demand.
“What happens in our most vulnerable communities is that we start businesses to survive and not based on market opportunities,” said Klassi Duncan, vice president at the Urban League of Louisiana’s Center for Entrepreneurship and Innovation. “We fall into the trap of creating businesses that may not be profitable and have cash-flow constraints. And there’s no safety net.”
“Not many of us inherited our family’s thriving and successful business,” she said. “Nor did we inherit the experience of parents or grandparents to show us how to become successful entrepreneurs. We start businesses to survive based on what we know.”
During the coronavirus pandemic, there has been an extra layer of problems. Because people in low-income communities are at a higher risk from existing health conditions, there’s fear about working in jobs among the general public and getting out into businesses.
“Our businesses have to take more precautions because our customers are afraid to venture out because of the disparity with COVID-19 impacting the health of minority communities,” Duncan said.
Black-owned businesses are less likely to have access to a rainy day fund or generational wealth to afford much personal protection equipment, she said.
Up to half of minority-owned businesses are expected to close across the nation during the coronavirus pandemic, according to the Urban League.
In Baton Rouge, 41% of Black-owned businesses told the Baton Rouge Area Chamber they laid off workers in the week before its August survey, compared with 12% as the national average.
Patrick Alexander and wife Marylin co-own and operate Occasions Unlimited, a Baker reception hall. At first, 2020 was shaping up to be the best year ever for the 11-year-old business, with 10 events before March 7.
The pandemic and related stay-at-home orders caused the weddings, banquets, family reunions and other social gatherings that are a staple of the business to dry up. Under current restrictions, social gatherings are capped at 50 people; Alexander said most weddings usually have more than 100 guests.
“We’ve had four events since March and two more scheduled until the end of the year,” he said. “The only reason we’ve survived so far is we had some funds in our account prior to the pandemic.”
The Alexanders are the only employees at Occasions Unlimited. They used personal funds to keep the business going and obtained a $17,000 Small Business Administration loan that should cover all expenses for the rest of the year.
“It’s hard right now,” Patrick Alexander said. He said he’s trying to get a Main Street Recovery grant from the state to pay for maintenance and some advertising in the hopes he can get Occasions Unlimited going again in early 2021.
“Grants are the only thing that can assist us if we can’t have people coming in,” he said.
The statewide Main Street Recovery Program in Louisiana carved out $40 million of its $275 million pot of funds for small businesses owned by minorities and women and has gotten tens of thousands of applications so far. Resilient Restart EBR has already gotten about 300 completed applications to sort through for small $2,500 micro grants. Since the pandemic began, there’s been a wave of new clients reaching out.
The Urban League represents many salon owners, landscaping businesses, maintenance services, food services, retailers and product manufacturers. The goal is to build a more resilient business network among minority-owned businesses in Louisiana.
“We want to be able to weather the next storm, but this takes a deliberate approach to business development,” Duncan said.
Some tips going forward include gathering financial documents such as tax records; taking time to reconsider the business plan; carving out time to reimagine the business for delivery or online sales, which would improve its chances of survival; combing through the financial and operational limitations of the company; and making time to tackle any existing credit or other financial issues that could help right the ship, she said.
“Get connected to the ecosystem. Connect with one of us and you can reach us all for support,” she said.
The Louisiana Small Business Development Centers at Southern University and LSU, along with local volunteers from SCORE, a national organization of business executives that mentor small businesses, are resources for small businesses in the region. They can be found online at lsbdc.org and score.org/find-location.
Some participants during a recent webinar hosted by the Urban League shared that public agencies hosting more webinars and virtual meetings with procurement officers has leveled the playing field with government contracting opportunities.
While some may advise transitioning to a new career or business model, it’s not always easy to pivot and invest in college or even vocational training for adults with responsibilities.
“What if you don’t have the resources to make it happen; how are you going to enroll?” Duncan said. “It takes deliberate effort and consideration for money for transportation and childcare.”
For example, someone in the service industry can juggle family time because they are able to work the late shift.
“It’s not as cut and dry,” she said.
And some industries are experiencing a particularly long dry spell as concerned residents across the state stay at home.
Jason Hughes, owner of Capital City Collision, said business dropped off at his Scenic Highway auto repair shop because so few people were driving in the spring.
“I was a little bit fortunate because things were going good before COVID, but it definitely hurt,” he said. “For small businesses that were not doing so good, they can’t function anymore,” he said.
Capital City Collision had a four-week backlog of work when the pandemic hit in early March. After that work was done, Hughes said he was only seeing a repair job or two a month.
“It was a hell of a learning experience,” he said. During the slowdown in business, Hughes said he sat back and looked at all of his business spending.
That caused him to make some changes, like reducing the number of software user IDs he was paying for and trimming back on subscriptions to services.
“If I was able to save a little bit of money every month, it let me keep people employed,” he said.
Over the past month or so, Hughes said business has picked back up close to where it was before the pandemic hit in early March. He said the chamber needs to do a better job of using Black-owned businesses like his as liaisons to other firms to better address the needs of the community.
“They need to lean more into people to get more connections,” he said, “instead of allocating dollars to contracts with consultants.”
In order to address the health of Black-owned businesses, the Baton Rouge Area Chamber made three recommendations. One is for the businesses to apply for grants or low interest loans from government programs, such as Main Street Recovery and the Resilient Restart EBR. The second is for a specialized outreach to contact Black-owned businesses with recovery information, such as a targeted promotion of any new federal Paycheck Protection Program funding if it becomes available. The third is for the state to increase the reach of high-quality small business development programs, with a special emphasis on helping Black-owned businesses.