Help wanted: Local small businesses haven’t caught a break since COVID

There are more than 30 million small businesses in the United States. Predictions now say that one out of three will fail to survive the pandemic without government help, a number that is without historical precedence. And the troubles has hit BIPOC business owners more severely.

Last year, between February and April, the number of active business owners decreased by over 3 million. A closer look revealed that there was a 41% decline in Black ownership, and a 36% drop in immigrant ownership. Latinx ownership decreased by 32% and women-owned business by 26%.

“Even before the pandemic, I was concerned about the speculation and gentrification pressures that limit small business owners,” said City Councilwoman Jamie Gauthier who has been touring the business corridors in her West Philadelphia district to get a firsthand look at the problems she calls the “triple whammy” of COVID — business shutdowns, economic recession, and civil unrest.

For Philadelphia, a city of neighborhood business corridors —  over 100 of them — this prediction of demise is dire. A 2019 report from the Small Business Administration, showed that small businesses created 2/3rd of the jobs and 44 percent of the U.S. economic activity. Now the government will have to pump resources into them to keep them alive. But exactly what help is needed is the dilemma.

PACDC just announced it has won a $577,500 grant in in the TD Ready Challenge, beating out hundreds of other applicants, for its Save Your Biz Philly program designed to help debt burdened businesses — especially those owned by or serving people of color — stay in business.

Save Your Biz Philly will connect these financially fragile businesses  with experts who, in turn, will provide them with free legal representation, technical assistance, and financial counseling. The goal is to help companies successfully navigate the First Judicial District Commerce Court’s new Temporary Financial Monitor Program. The program, which launched in June, works with businesses who have experienced significant economic harm from COVID, to keep them operational.

“Maybe an owner is behind on rent or owes suppliers — a temporary financial monitor from the Commerce Court works to facilitate a negotiation between the business owner and a creditor,” PACDC Executive Director Rick Sauer explained.

But governmental help comes with bureaucratic hurdles that delay help but don’t keep problems from mounting.

“Our businesses that had closed in the spring are still struggling to make up back rent, and many of their customers have still not returned. They need money, and it rings hollow to tell them we care but not be able to address their actual needs,” testified Ellie Devyatkin, commercial corridor manager for the Frankford CDC speaking on behalf of the 1% Construction Impact Tax.

The tax, which is scheduled to take effect next January, will generate $20 million annually to fund a $400 million bond issue to invest not only in affordable homes, but also neighborhood commercial corridors which will create jobs.  “A 1% tax on construction is not enough to make up for generations of disinvestment and inequity, but it is a start,” Devyatkin said.

Advocates say a robust small business community is the answer to Philadelphia’s unemployment problem.

Narashima B. Shenoy, president and CEO of the Asian American Chamber of Commerce of Greater Philadelphia did the calculus. Currently, he explained, there are 13,000 Asian-run small businesses in the city. If most of them could grow just enough to add even one employee, it would mean over 10,000 jobs in the city — in some of the most impoverished communities.

Yet, statistics indicate almost eight out of 10 Asian business owners describe their financial situation as fair or poor as compared with 57% of businesses overall. It’s a number that doesn’t surprise Shenoy.  “The Asian American business owners have been hard hit and 30 percent are not coming back.”

He explained that many Asian American owners are recent immigrants with significant language and cultural barriers. This is compounded by low digital and financial literacy as well as weak banking relationships. “It is why we are opening another office in South Philadelphia on March 1st. So that we can be closer to the people.”

“If Latino businesses grew modestly, by one or two employees, we would be creating 11,000 to 22,000 jobs in the communities that need it most.” That job-creating message is from the Greater Philadelphia Hispanic Chamber of Commerce (GPHCC) website, which further stated that Latinx entrepreneurs start businesses at three times the rate of the general population, and comprise 40% of the area’s minority owned businesses.

“What we know is that Latinos have a strong immigrant character that values resiliency and grit. We are finding research from Stanford University that says the majority of Latino business owners believe they can recover, but the numbers don’t quite bear that out,” said Jennifer Rodriguez, president and CEO of the GPHCC.

Rodriguez said many of the business in Latino neighborhood commercial corridors are restaurants, bodegas, hair salons, auto repair shops and the revenue is down significantly from last year, at least 44%, while programs such as the Paycheck Protection Program (PPP) had not had much impact.

The GPHCC has created its own relief fund, which has raised $15,000 to provide microgrants to Latino restaurant owners. “While there is a lot of optimism, it has been very difficult and in many ways devastating,” Rodriguez said.

“It’s been rough,” agreed Darlene Jones.

Jones opened her newest restaurant — Star Fusion Express on 63rd St. — last March, in the midst of the pandemic. Instead of growth she saw the site lose 50% of revenue because COVID social distancing rules has devastated large gatherings and events. Half of her revenue was from catering large parties and serving university clients like Swarthmore, Villanova and the University of Pennsylvania.

“63rd St. has done horrible because of COVID.” Now, with only a takeout clientele, Jones is considering closing the second site. Still, she has been able to keep her 22 part- and fulltime employees with its monthly $20,000 payroll employed — a priority for her — but at a personal financial sacrifice.

“Several businesses have told us that they have been struggling to make ends meet due to a lack of business. COVID-19 has halted contracts and productions, and in some cases required layoffs. Some business owners were able to keep their staff on payroll, but they had to dip into their savings to make that happen,” said Victoria Hosendorf, executive vice president of The Enterprise Center.

Jones has applied for help.

Her application for funds under the Paycheck Protection Plan during the first round were denied, and she is trying again. According to the Enterprise Center, minority-owned companies were largely excluded from the first round of PPP funding and they are working to prevent this with the second round.

Jones also applied for the city’s new  Philadelphia COVID-19 Restaurant and Gym Relief Program (RGRP) with grant awards up to $15,000 per business for restaurants with indoor dining as well as gyms, and businesses whose primary activity is indoor exercise.

“I don’t know why I didn’t get that one,” she sighed, “It had my name in the title — restaurant.”

While they acknowledge it may be a pipe-dream, most small business advocates think smaller less sophisticated business owners need a different set of rules if they are going to be helped, including:

• Direct cash which could be accessed easily and quickly from the most flexible source and with no strings attached.
• Interview owners for grants and ascertain what owners would do with the money. Grant decisions would not be based solely on a written applications.
• More intentional outreach, with an understanding that business owners face language, cultural, digital, and financial literacy barriers.
• Focus on creating a tax and regulatory environment that sustains small business and not further push them to the brink of existence.

The deadline to submit applications for the Restaurant and Gym Relief Program is 11:59 p.m. on Tuesday, February 9. Our sister publication, Technical.ly, has created a guide of supports for small business as part of their series — Boosting Black and Latinx Entrepreneurship in Philadelphia. You can find it here.

Generocity is one of 22 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push toward economic justice.