Thought Leadership

SolveIt: The Concentrated Health and Wealth Effects on Black Communities

A just-released report from the Federal Reserve Bank of New York compiles devastating data to tell the story of how communities of color have borne a disproportionate cost of the COVID 19 virus.

In Double Jeopardy: The Concentrated Health and Wealth Effects on Black Communities from COVID-19, the authors uncover the reasons why Black firms have been almost twice as likely to shutter since the COVID 19 pandemic as small firms.

“Counties with the highest concentration of COVID-19 are also the areas with the highest concentration of Black businesses and networks,” the authors wrote, noting that “weaker cash positions, weaker bank relationships, and pre-existing funding gaps left Black firms with little cushion entering the crisis.”

These funding gaps include findings that:

  • The Paycheck Protection Program, the federal government’s signature relief program for small businesses, reached only 20% of eligible firms in states with the highest densities of Black-owned firms, and in counties with the densest Black-owned business activity, coverage rates were typically lower than 20%.
  • Weaker cash positions, weaker bank relationships, and preexisting funding gaps left Black firms with little cushion entering the crisis: even the healthiest Black firms were financially disadvantaged at the onset of COVID-19.

These financial barriers are not new. An interesting and related data point from our July survey panel results: 87% of those surveyed had applied for a PPP loan; 74% of Black panelists had applied, compared to 89% of white panelists, and 88% of Latinx panelists. Of those who applied, 100% were approved and received funds.

In Interise’s landmark 2018 paper, Bridging the Wealth Gap, developed in partnership with the US Conference of Mayors, Interise calls attention to the breakdown in access to capital for minority-owned businesses as a key barrier to small business growth.

“…(M)inority-owned businesses are more likely to be declined a loan, receive smaller loan amounts, and often pay higher interest rates than white-owned businesses.” This leads to a ‘trust gap,’ where many minority business owners do not ask for capital from financial institutions and banks because they think they will be turned down.

Compared to white business owners, Black business owners are almost three times as likely to report lower profits because of a lack of access to capital.

It is estimated that more than half of Black-owned businesses will fail because of COVID 19. We must act now.

SolveIt: Financial Institutions

In a recent Kellogg Insight article, William Towns, an adjunct lecturer of social impact and managing director of a private equity fund at 4 S Bay Partners, LLC, lays out steps financial institutions can take to create more equitable access to capital for Black owned businesses, including:

  • Revisit Creditworthiness Measures

Towns writes, “One of the biggest barriers to Black and minority entrepreneurship stems from long-held beliefs by banks and other financial institutions that these entrepreneurs are higher-risk candidates for mortgages and other loans.”

  • Boards of Directors  – Step Up

In the Kellogg Insight, Towns also suggests, “for Black- or other minority-owned companies to get funding from private equity firms, venture capital funds, angel investors, and banks, the boards of directors of those funders need to reflect the communities they purport to serve.”

SolveIt: State, City & Local Organizations 

Black-owned businesses need help NOW to protect their investments, to access capital, to retain their employees, to survive.

Some states are loaning much-needed funds to small businesses. Virginia Governor Ralph Northam and Virginia Department of Small Business and Supplier Diversity Agency Director Tracey Wiley recently announced $70 million for small businesses and nonprofit organizations whose normal operations were disrupted by the COVID-19 pandemic. The grants of up to $10,000 are being made available to 7,000 applicants to cover eligible expenses.

Other organizations, such as the US Conference of Mayors, are helping their businesses by connecting them with direct delivery programs such as Interise STRONG. Based on the award-winning Streetwise ‘MBA’ executive education program,  Interise STRONG was developed specifically to help small businesses weather COVID 19. The multi-week, synchronous, online program connects small businesses with the knowledge, know-how, and networks needed to pivot, get access to capital, and stabilize over the coming months and years.

SolveIt: Small Business Owners


Kimber Lanning from Interise partner Local First Arizona, says everyone has to do their part.

“The best way business owners can fight unfair bias in lending is to establish relationships with local bankers, and establish accounts with smaller, local banks or credit unions.”

There’s no time to waste. The Federal Reserve Bank of New York’s report makes it clear in its conclusion: “To have the greatest impact, the next round of COVID-19 relief should be more targeted geographically to focus on the hardest hit areas and communities that lack critical infrastructure (hospitals, banks) to ameliorate the gaps. Furthermore, the racial disparities in bank relationships prior to COVID-19 detailed here raise structural questions about the presence of banks and access to credit in communities of color, questions that have heightened significance when banks are relied on to administer federal, taxpayer-supported relief programs, as is the case with PPP.”

It’s time to SolveIt. Reach out to join us.