How COVID-19 Has Only Exacerbated the Inequalities Between BIPOC, and White Owned Businesses



Entrepreneurship is typically observed as a fanatic line of work for a person who is too blindsided by an abundance of wit and skillful determination to understand that they are risking financial hardship, and economic deficiencies in the long term. Starting a business commonly takes the average American an accumulation of savings, loans, and perseverance to even begin working on something small, and although many entrepreneurs masterfully anchor the art of business building after some time, creating a well-functioning company from scratch, isn’t as easily obtainable for everyone ― especially minorities.


An estimated half a million small businesses close each year in the United States alone, with minority owned businesses maintaining the standard highest percentage. This is particularly alarming due to the fact that minorities only account for 4 million U.S. small businesses, yet they make up nearly 60% of the half a million failed businesses per year. These factors are inconceivably disproportionate, and further beg the question:

“why are minority owned businesses more likely to shut down in America? What are they doing ?”.

The problem here is not poor salesmanship, bad products, or anything else that minority owned businesses are particularly doing wrong. The real problems that have continued to plague BIPOC businesses are the lack of resources, funding, and access to loans that should otherwise be readily available to these companies, but aren’t.


As COVID-19 struck America in early 2020, all eyes were on small businesses, as many, (specifically minority businesses) struggled to find sanction amidst chaos, and hoped to create new sources of online revenue that could be adapted due to restrictions that only furthered financial insecurities. Although there was an original fighting push for the support of local businesses, there was only so much that could be done for minority businesses that were facing debilitating financial and resource inequality, even prior to the pandemic.

Prior to the Pandemic


Before the COVID-19 outbreak, minority owned small businesses were already facing fragile financial stability due to their disproportionately low income, decreased susceptibility of receiving processed loans, and miniscule chances of opportunity resources that are more often offered to White owned businesses. This frangible financial status that many BIPOC businesses were harrowed with, even before the pandemic belabored America, indefinitely forced many localized and small companies to close for good.


A national poll by the Federal Reserve Banks revealed minority owned small businesses were more likely to show signs of financial distress, in profitability areas, than their non-minority owned business counterparts. These same companies were twice as likely to be classified “at risk”, or in a “distressed state” than non-minority owned businesses. This is ultimately troubling, as the Federal Reserve has indicated that companies deemed “at risk”, are three times more likely than healthy businesses to shut down entirely.


It is also estimated that minority owned small businesses faced financial limitations due to a fairly limited access to loans that were more often issued to white small-business owners instead. According to findings from the 2018 Small Business Credit Reserve, large banks had provided 60% of loans to white small-business owners, 50% of loans to Latino small-business owners, and a subsequently low 29% of loans approved for black small-business owners. Loans were more unlikely to be issued to minority owned businesses, due to extensive profiling that has been noted as an incentive for banks to inquire further into an owners' personal financial statements, which in most cases does not accurately reflect actual health, and predict a company's growth. The acquisition of loans is fundamental for many business owners, helping to kick start a company, and grow from scratch. Loans are also crucial in times of income droughts, and help to get many companies out of “rough patches.” Without approved loans, financial fragility only continued to disproportionately burden minority-owned businesses, forcing many to struggle without much assistance.

Current Struggles

Already susceptible to financial onslaught, many economists prior to the pandemic estimated that with any minor recession, minority-owned businesses were increasingly more at risk of permanent closure. According to a recent report issued by the U.S. Chamber of Commerce, these predictions were undoubtedly correct. Findings from the report indicate that, in a national polling, 66% of minority small businesses were recorded as feeling distressed regarding their business permanently closing, versus 57% of non-minority owned business owners who felt the same.

Many of these business owners’ rational fears are compatible with the blatant statistics that have recently surfaced.

Between February and April alone, the National Bureau of Economic Research, issued a paper, estimating that 41%, and 32% of Black and Latinx owned businesses, respectively, shut down, due to financial hardship and increased restrictions due to COVID-19.

This is contrastable to the subsequently low 17% of white owned small businesses that were shut down in the same three month time span.

For the minority owned businesses that continue to operate, a steady income is hardly normal anymore, making the likelihood of staying open for much longer hardly achievable. Findings from the JPMorgan Institute, prove that as of March alone, which marked the beginning of the pandemic, cash reserves for most Black owned businesses decreased by 26% from the last year, while Asian owned businesses had a decrease in cash reserves by roughly 20%. The significant revenue decrease within the Asian owned small business population is particularly alarming, since Asian owned businesses are more commonly reconcilable with maintaining the same capital as that of White small businesses.

Why Minority Owned Businesses Matter

Not only do BIPOC owned businesses help provide both ethnic, and creative diversity amongst the business sector, they also account for around 6 million small businesses that acquire working employees.

As minority owned businesses continue to close more rapidly throughout the current COVID-19 crisis, not only will a fearful 6 million small business owners risk financial debilitation, but so will their employees and their families, and stiff incomes to produce. These small businesses are more than just a projected net worth, with a storefront, and a name; these businesses are employers to working class citizens who are trying to provide for themselves, and their loved ones.

Small businesses are also a significant bolstering factor to our national economy, and while minority owned businesses account for an estimated 15% of small businesses in the U.S., the downfall of BIPOC owned businesses will significantly burden the national economy with lost capital.

Prolonged Inequality

The financially disproportionate hardships that minority owned businesses have been burdened with decades prior to the COVID-19 outbreak has ultimately paved the way for an elongated, more taxing recovery in sight for the millions of businesses now closed, and the innumerable sum of jobs lost throughout this pandemics tolling course. In a public statement released earlier this year, Suzanne P. Clark, the sitting president of the U.S. Chamber of Commerce said,


“The pandemic’s disproportionate impact on minority-owned small businesses is further evidence of systemic inequalities in our country. Even more concerning, the pandemic could exacerbate and elongate the economic struggles already facing minority-owned businesses and families."

Clark proceeded to state that the Chamber of Commerce is actively working to bolster change and equal opportunity for the entirety of America's business sector since they believe that change must soon ensue; allowing America to let down minority owned businesses is ultimately permitting our system to enable the inequality that only continues to fail a group of Americans who deserve the same fair treatment and opportunities as our population’s majority.


America prides itself on the maintenance of it’s most coveted, “American Dream” ideology that has been exhaustingly peddled for over a century. This ideology has since built upon the nationalistic view of America and all of it’s promised opportunities, freedoms, and equalities ― and yet, minorities are only persisting to fall victim to attacks initiated by our own government system.


A nation can not guarantee to protect the freedoms of all people's rights, and then out rightly belittle BIPOC creators, innovators, and entrepreneurs that remain the influential trailblazers of this country. As long as this country continues to fail BIPOC business owners, and further prolong their immeasurable struggles throughout the ensuing course of this pandemic, this nation will remain a hypocrisy at its core.



This article was originally published on Detester Magazine

Detester Magazine, founded in 2019, is a youth-led platform dedicated to amplifying BIPOC youth activism and socio-political issues. We truly believe that art and writing are powerful mediums for change. We want to advocate issues that affect BIPOC communities, whether it concerns politics, society, culture, mental health, environment, and etc. We aim to push past the endless single stories to deliver a picture that expresses distilled human emotions and diverse perspectives. *The name Detester Magazine reflects our goal to combat the hate and bigotry that stem from ignorance.

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