Black-owned businesses in New York State closed at nearly three times the rate of white-owned businesses as the state instituted a 3½-month shutdown of nonessential activity to slow the coronavirus’ spread, according to a new report.
Researchers at the Federal Reserve Bank of New York found the number of operating Black firms fell 56% from February, before the state lockdown began, to May, when the economy began to reopen in phases. The number of operating white firms declined 19% in the same period, according to census data analyzed by the researchers.
The number of operating Hispanic firms dropped 43% between February and May.
Data for Long Island wasn't large enough to be reported separately. But two local experts said on Wednesday that Black-owned businesses in Nassau and Suffolk counties have closed, either permanently or temporarily, at a similar rate to the statewide data.
New York Fed researchers Claire Kramer Mills and Jessica Battisto said in their eight-page report, “Certainly, many closures to date have been temporary and owners may decide to reopen when conditions improve.”
The pair examined how the coronavirus pandemic affected Black-owned businesses in states with large Black populations.
New York State had the second-largest decline in operating Black businesses between February and May after Ohio. However, Ohio, Georgia, Florida and North Carolina had wiped out their respective losses by June because their economies reopened more quickly than New York’s, which saw a 32% drop in operating Black businesses between May and June.
New York’s Black-owned firms were hit harder by the virus and shutdown. Nationwide, the number of operating Black businesses fell 41% between February and April compared with 17% of white firms and 32% of Hispanic firms, according to a separate study from the nonpartisan National Bureau of Economic Research in Cambridge, Massachusetts.
Black-owned businesses, as a group, fared worse because they are weaker financially than white-owned businesses and lack strong relationships with banks.
"These firms had weaker financial cushions, weaker bank relationships, and preexisting funding gaps prior to the pandemic,” the New York Fed researchers said in releasing their report on Tuesday. “COVID-19 has exacerbated these issues and businesses in the hardest hit communities have witnessed huge disparities in access to federal relief funds and a higher rate of business closures.”
That's true in this region, too.
Phil Andrews, president of the 375-member Long Island African American Chamber of Commerce, said, "A lot of our businesses are sole proprietorships and undercapitalized, then you have a crisis like this, and they have to close for good. They were fine before but couldn't sustain themselves during the crisis," he said.
Theresa Sanders, president of the Urban League of Long Island Inc., agreed, saying, "Our region is racially segregated, and the businesses in those segregated communities were already struggling" before the virus struck. "Small-business owners have told me that they were not financially prepared for how the pandemic impacted them. ... The chances that many of them will not reopen is extremely high," she said.
Last month, the league and BNB Bank held the Long Island Small Business COVID-19 Recovery Challenge, where five businesses were awarded $5,000 grants.
PANDEMIC BUSINESS CLOSURES IN New York State
56% of operating Black-owned businesses between February and May
43% of operating Hispanic-owned businesses
19% of operating white-owned businesses
SOURCE: Federal Reserve Bank of New York