Corporate Leaders Suggest Bailout for Minority and Women Businesses
WASHINGTON – Business leaders, during a congressional hearing Thursday, advocated for greater access to financial services for minority and women-owned businesses.
They said government bailout money and low-interest loans for businesses during the COVID-19 pandemic are going first to established corporations that lack large representation by minorities and women.
As a result, about half the businesses owned by ethnic minorities or women are in danger of failing if they do not get assistance soon, according to witnesses at a House Financial Services subcommittee hearing.
“While the nation lost 3.3 million small businesses in the first and second quarter of the year, the number of Black enterprises declined 41%, Latino firms dropped 32%, Asian businesses dropped by 26% and women-owned businesses declined a quarter,” said Ron Busby, president of the U.S. Black Chambers, Inc.
African Americans, Latinos, Asians and women tend to be concentrated in what he called “high-impact Industries,” such as hospitality, food services, retail and personal care.
“They were already in a weaker financial position,” Busby said. “The advent of the pandemic exacerbated the challenges.”
He described the federal government’s primary recovery program, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as a salvation for many businesses.
The CARES Act provided more than $520 billion to struggling small businesses, largely through the Paycheck Protection Program. In addition, the CARES Act allowed the Small Business Administration to offer nearly $140 billion in low-interest loans.
However, the CARES Act gave only scant consideration to minority and women-owned businesses, Busby said.
A better alternative can be found in the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act Congress is considering now, he said. It is the pending successor to the CARES Act that gives a second round financial bailout to businesses and individuals during the recession caused by the COVID-19 pandemic.
Provisions of the HEROES Act would set aside bailout money for Community Development Financial Institutions, Minority Development Institutions and small firms with fewer than 10 employees.
Other provisions establish technical assistance grants for small community financial institutions and propose federal guarantees for COVID-19 loans.
The HEROES Act “resolves many of the structural barriers that minority and women markets currently face amid the pandemic,” Busby said.
The House subcommittee on diversity and inclusion is considering several other bills to address inequalities in bailout funding. They include:
The New Business Preservation Act: This bill authorizes the Treasury Department to partner with states to make equity investments in new businesses alongside private venture capital companies, with special consideration given to minority and women-owned companies;
The Emergency Lending Diversity Act: This bill would require the Federal Reserve System to use minorities and women as investment advisers, brokers and dealers in investment management agreements;
The Minority Business Emergency Grants Act: This bill would provide $3 billion in grants directly to minority business enterprises through the Minority Business Development Administration.
Carmen Castillo, chairwoman of the U.S. Hispanic Chamber of Commerce, warned that the consequences of losing too many minority and women-owned businesses go far beyond the owners and their employees.
“When we fail to invest in minority-owned businesses, our economy suffers,” Castillo said. “In fact, according to the Kauffman Foundation, if minorities were able to start and own businesses at the same rate as non-minorities, there would be 9.5 million more jobs and, according to Stanford University, $1.3 trillion added to the American economy.”
Karen Kerrigan, president of the Small Business and Entrepreneurship Council, suggested “co-investment” through public-private partnerships.
“That is, when a small business reaches its target goal for raising funds, the federally-run fund can match that investment up to a certain amount,” Kerrigan said.