Sponsored By Cross River Bank
This is the first in a series of articles that will examine how minority and women-owned businesses navigated the complex financial options and resources available to them throughout the pandemic. The reports will highlight issues, including how MWBE’s are recovering from the after-effects of COVID-19 and how banks and other financial institutions are assisting in their recovery
Remember the phrase, “Hell hath no fury like a woman scorned?” Last year, the coronavirus hit America and the metro area with all the rage, anger, and fury of a scorned woman and man, for that matter! The virus shattered hundreds of thousands of lives and destroyed countless businesses –with small minority and women-owned businesses (M/WBE’s) bearing the brunt of its wrath.
According to various statistics, about 1 in 4 small businesses have been or will be permanently closed due to COVID-19. Despite rescue measures from the federal government and infection levels and fatalities related to the virus have leveled off, thousands of area MWBE’s remain wary of the future of their businesses. Despite false assurances in March 2020 from then-President Donald Trump that “Corona was a hoax and that America would be back up and fully running by Easter, the country crumbled under an unseen yet virulent enemy. It became clear to millions of business owners that things were about to get a lot worse.
The PPP quagmire
The beginning of the end is how thousands of New Jersey entrepreneurs envisioned the effects of COVID-19 on their small businesses. Lindsey Holmes is the owner of Usable Tech Co.–a Newark-based digital tech agency specializing in usable tech solutions for small and mid-sized companies. The eight-year-old company was on the verge of closing its doors permanently when COVID hit. The pandemic created anxiety about my health and the future of my business,” she said. “We were hanging on by a thread.”
Like hundreds of thousands of other businesses across the country, Holmes immediately applied for emergency funds through the CARES Act and specifically the Paycheck Protection Program (PPP). The government created a program managed by the Small Business Administration (SBA) to help small businesses survive the pandemic. Political proponents of PPP included Florida Republican senator Marco Rubio who lauded it in the first few months after its inception. He said, “More than $500 billion in PPP loans injected into small businesses across the nation during April and May, our economy added a record 2.5 million jobs– all amid a pandemic. He added that M/WBE’s were among the biggest recipients of the funds. “Black and Hispanic-owned firms account for 7.8 percent of all small businesses in America, but they received 10.6 percent of total PPP loans distributed, resulting in 10 percent of the total jobs retained.” Despite Rubio’s rosy outlook and alleged positive outcome results and many of his Republican colleagues, thousands of primarily Black and Brown businesses complained that they were all but shut out of the PPP. It was poorly targeted, and implementation of it was slow, and access to it was tedious and lugubrious.
From New Jersey to Florida, complaints about it echoed loudly. In some cases, M/WBE’s sought help from local and regional politicians. For example, outspoken small business advocate Nydia Velazquez (D-NY) pushed for significant changes to the PPP. In a press release, she said, “I will keep pressinng for additional funding and commonsense reforms to strengthen federal relief efforts and ensure that all small businesses have the opportunity to secure capital and other resources.” A study released last week by the Pacific Research Institute (PRI), a California-based government think, highlighted data from the Federal Reserve. The report showed that about one-half of small businesses that received the total PPP loans/grants laid-off workers or permanently closed despite receiving financial assistance.
“I wasn’t sure if we were eligible to get funds and initially I couldn’t get clear answers to my questions about PPP,” said Joshua Suggs, owner of Delta’s Restaurant in New Brunswick, NJ. The popular eatery and bar closed for nearly a year. When it did reopen this past spring, it was at a limited capacity. In another twist, Suggs tested positive for COVID-19 and was in isolation for months. He fully recovered. The restaurant was eventually able to secure funds from PPP. “My employees qualified for the extended unemployment benefits and I was able to rehire most of them.”
And in Florida, one of the states with the largest number of black-owned businesses—behind New York and Georgia, minority business owners also struggled to secure funds. In an interview with the website The Moguldom Nation in April 2020, Vania Bredy, the owner of a physical therapy and sports rehabilitation in south Florida, said, “I don’t know anyone who’s gotten any (PPP) funds in their account. I know at least ten different healthcare providers that tried to apply and had problems.” Similarly, some LGBTQ owners also besmirched PPP. “It was a struggle to navigate the system,” said Bobi Lore’, owner of Island House, a private resort in Key West. “We were eventually able to secure the loan; however, there are some strings attached to it.” For example, many businesses have to adhere to strict and specific guidelines not to repay the loan.
Another criticism–larger banks gave preferential treatment to big companies and made the funding process more manageable and ultimately more generous. Banks all but dismissed and ignored applications from mid-sized and smaller businesses. And, in some cases, when M/WBE’s were next in the queue to receive loans, PPP funds were depleted. For example, during the early days and even up until the program officially ended on May 31, 2021, megabanks such as JP Morgan Chase, Bank of America, and Wells Fargo were often highlighted for making the availability and distribution of PPP funds difficult.
Lastly, Cross River Bank, a community bank in Fort Lee, New Jersey, eschewed the initial flops and fumbles made by some of its larger competitors in administering funds under PPP. Cross River Bank almost exclusively operates as a service provider for online lenders. The bank was the PPP’s sixth-biggest lender and perhaps the most successful.
(In part 2 of the series, NJURBAN NEWS will highlight Cross River Bank’s booming and growing success as a viable funding resource for minority-owned businesses).