While we were publishing our first blog post in this two-part series on the pandemic’s effect on Black DC residents, wealthy business leaders and developers—including the corporate giant Amazon—were pitching the DC Council on massive tax cuts for selected businesses affected by coronavirus (COVID-19). Those cuts would blow a huge hole in our budget and take funds away from crucial public investments, like affordable housing and child care programs. That most Council members agreed to privately meet on DC Emancipation Day reflects both the constant threat of corporate sector influence on public policy and the indifference to a holiday meant to commemorate the day white enslavers could no longer own our bodies as capital.
A list of the coalition members shows that most of the businesses asking for massive tax cuts are not small businesses, but mostly large, white-owned companies who, due to outsized access to power and wealth, are least likely to need help to survive the economic shutdown. This ploy mirrors federal efforts to protect big business at the expense of actual small businesses—especially Black-owned ones.
So many of DC’s Black residents have already been forced out due to rising costs and gentrification, and now the survival of Black-owned small businesses is at stake, threatening to undermine who and what DC is.
Is COVID-19 On Track to Wipe Out DC’s Black-Owned Businesses?
Before COVID-19 took the District by storm, many Black-owned small businesses—some that have been social and cultural pillars in their communities for decades—already had their backs up against the wall. Soaring rents and property taxes, lack of access to financial cushions, and the whitening of “Chocolate City” forced owners of some of these beloved institutions to shutter their doors. And now, with government-mandated closures of nonessential businesses and prolonged stay-at-home and physical distancing orders in place, even more Black-owned small businesses face economic devastation and are at risk of vanishing from the city.
In order for any business to survive during “regular” times, owners need to be able to easily turn some of their resources into cash in order to pay bills in the short-term. Yet, few Black-owned small businesses tend to have enough cash on hand to cover expenses, with a majority having only two to three weeks’ worth of cash available. Black business owners often lack assets—such as home equity—that they can use as collateral to invest in their businesses, let alone use to keep their businesses afloat amid an economic disaster. This is due to the persistent racial wealth gap—a result of this nation’s racist history of denying us access to government-sponsored, wealth-generating programs.
Discriminatory financial lending practices also threaten the future of Black-owned small businesses in DC. Black and brown business owners nationwide are twice as likely to be denied loans than their white peers, are more likely to receive lower loan amounts when they do receive loans, and pay higher interest rates. While local and federal policymakers have created economic relief programs that the District’s Black-owned business owners could tap into, a closer look at the federal program reveals how policies and rules heavily disadvantage them.
Structurally Flawed Federal Relief and Bank Discretion Heavily Disadvantages Black Borrowers
The small business program in the federal Coronavirus Aid Relief and Economic Security Act that has received the most attention is the Paycheck Protection Program (PPP). Congress created it to provide forgivable loans that primarily cover the payroll costs of small business owners. Although the Treasury Department boasted equal treatment, it was immediately clear that federal officials set up the program to intentionally benefit large and financially connected business owners—many of whom did not need the assistance.
The structural rules of the PPP game allow many businesses to qualify as small if they have no more than 500 employees at one location. The rules only allow certified lenders to service these loans, giving an advantage to the certified banks that have existing relationships with wealthier borrowers that offer bigger loans and returns. As a result, companies like Ruth’s Chris Steak House, Potbelly, Shake Shack and the Los Angeles Lakers initially received millions from this program which contributed to the program running out of money, though some are now rightfully returning the money.
The comprehensive set of PPP rules and regulations issued by the U.S. Small Business Association (SBA) harmed most small businesses, but Black businesses most of all. More than 95 percent of Black businesses nationwide are sole proprietorships with no paid employees, yet no more than 25 percent of PPP loans can be used on non-payroll costs like mortgage, rent, and utilities. Racist lending practices cause many Black business owners to bank with Community Development Financial Institutions (CDFI), yet less than 10 percent of CDFIs are currently certified to participate in PPP. The SBA even cruelly added a provision that PPP loans could not go to businessowners that are recent returning citizens. Due to unjust punitive drug laws, over-policing and sentencing disparities, we know that Black business owners will again bear the brunt of this exclusion. And DC’s status as a non-state may further exacerbates these trends—DC has been approved for the fewest PPP loans out of all the states.
Last week, Congress passed an expansion of PPP which included $30 billion for CDFIs, small insured depository institutions and credit unions. It is imperative that the Treasury Department publicly release racial data for all PPP borrowers in all states to ensure that loan allocations are equitable.
Next Steps for DC Leaders: A Balanced Approach
We commend District officials for quickly allotting $25 million to the DC Small Business Recovery Microgrants Program to help small businesses meet their short-term needs during this pandemic. Given the barriers and inequities that Black-owned small business owners are facing in accessing federal relief, it is crucial that the District collect and publicly release racial and ethnic data of microgrant recipients. If data show that they are not proportionately benefitting, DC should propose a plan to rectify this inequity and target additional but capped relief to these businesses in need of support. DCFPI submitted testimony earlier this year about the importance of targeted relief to legacy small businesses at risk of shutting their doors due to rising rents—many of which are Black-owned. In light of COVID-19, the District should prioritize the prevention of further displacement of these businesses.
Still given the budget shortfall, city leaders will need to balance the needs of both Black-owned small business owners and Black workers and their families in their response and recovery efforts to ensure that the city is meeting the increased demand for homeless services, rent relief for struggling families, and supports for people out of work. Black residents are DC’s essential workers, and they are disproportionately dying from the virus—they make up 80 percent of virus-related deaths yet are only 46 percent of the city’s population. The Mayor and the Council have a responsibility to dismantle the structures and policies that make our businesses and lives most vulnerable.
This is the second in a two-part series focusing on how COVID-19 is affecting Black communities. To read part one, see The Black Burden of COVID-19.
 This week, the District added $8.5 million to this program in local and federal dollars.