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Capital Gap, COVID Impact Formation and Growth of Black- Hispanic-Owned Businesses

Posted on 05/04/2021

As St. Louis continues to navigate the COVID-19 pandemic, a new report has identified a historic, unmet annual demand of approximately $13 billion in capital for small businesses in St. Louis, contributing to significant disparities in business ownership and growth for businesses owned by people of color.

Community stakeholders suggest that direct investment and focus on three strategies – ecosystem building, holistic service delivery, and continuum of capital – could address this massive underinvestment, address the racial wealth divide, and unleash the potential of St. Louis’ underperforming small business community, especially among BIPOC small businesses.

The full report will be presented at the St. Louis Small Business Ecosystem Insights and Action event on Tuesday, May 4.

“This report confirms what we recognize locally; to achieve the region’s overall growth, we must strengthen our support of Black and Brown business owners,” said Erica Henderson Local Project Lead and Former VP of The St. Louis Equity Partnership. “Enhancing our region’s ability to produce equitable opportunities to build wealth requires a coordinated call to action, intentional investment and holistic support of these businesses.”

The research, funded by JPMorgan Chase and conducted by Next Street and Common Future, examined the current state of St. Louis’s small business communities and business support systems, with a specific lens on local businesses owned by people of color and COVID-19 response and recovery.

St Louis City and St. Louis County is home to approximately 190,000 sole proprietorships. These small businesses and sole proprietors account for 24% of the local workforce. However, while Black residents make up 18% of the St. Louis County population, they only own 12% respectively. Business ownership disparities are paired with revenue and employment imbalances, with Black-owned businesses historically earning less revenue and hiring fewer employees than their White-owned counterparts.

The COVID-19 pandemic has only magnified these disparities. Since the start of the pandemic, total small business revenue and the number of small businesses open in Missouri decreased by 31% and 25%, respectively. During this crisis, Black-owned businesses in St. Louis were overrepresented in deeply impacted, neighborhood-based industries such as food services, laundry services, and retail. Hispanic-owned businesses were also significantly impacted, heavily represented in industries that have struggled due to lower consumer and nonessential business spending, including construction and food businesses.

“The COVID-19 pandemic has only shed a powerful light on what many have known for years: small businesses of color need more resources and capital to fully participate in our economy,” said Charisse Conanan Johnson, Managing Partner at Next Street. “We will not recover from the pandemic unless financial institutions, corporations, philanthropy, small businesses, nonprofits, and government work together to implement innovative solutions that help people generate wealth through small business ownership. Together, we can truly create a small business economy that works for everyone – regardless of your race, ethnicity or gender.”

“COVID-19 has unveiled for more people what we see in our work with local economies daily, and what data in our new report on St. Louis small businesses shows: Black-and Hispanic-owned businesses are systematically deprived of and excluded from investment and resources, despite being heavily relied upon in their own communities. They urgently need more support from capital and resource providers, which will benefit all of us in the long run,” said Rodney Foxworth, CEO of Common Future.

Solutions identified to fill gaps in the local small business support ecosystem include:

  • Ecosystem Building: Develop coordinated networks of business service and capital providers to promote improved outcomes and policies favorable to POC-owned small businesses. Ecosystem building efforts should build off existing momentum created by the pending merger of five regional economic development agencies and emerging anchor collaboratives such as SupplySTL and the Anchor Institution Initiative at the University of Missouri, St. Louis.
  • Holistic Services: Connect POC-owned small businesses to culturally competent services and training to support their success, while tracking and facilitating businesses’ long-term engagement over time. Holistic service efforts should integrate and refine existing assets such as the MOSourcelink small business resource repository, the Heartland St. Louis Black and Hispanic Chambers’ network of professional services providers and existing networking events.
  • Continuum of Capital: Increase availability of free or low-cost, flexible capital to build financial acumen while better financing and strengthening small businesses. There are several new or emerging efforts in St. Louis that will create a strong foundation for this work. Examples range from special emergency grant funds created in response to the COVID-19 pandemic (e.g., Invest STL Neighborhood Solidarity Fund, STL City Small Business Grant Fund) to a new five-year fund being launched in 2021 to provide grant capital, education and advice to small business owners.

“Small businesses thrive in environments where transformative steps, policies and practices reign. The partnership between JPMC and local partners in supporting the St. Louis small business landscape for black and brown businesses in the Greater Metropolitan St. Louis Region will remarkably change the economics for generations to come.

We are long overdue for organized collaborative efforts across Academia, Government, Community Development, Financial Institutions and Private Industry working towards the common cause of lifting black and brown economics. This is monumental work.”

Veta T. Jeffery, Chief Diversity Officer, St. Louis County and Managing Board Member, Heartland Saint Louis Black Chamber of Commerce “Small businesses make St. Louis thrive!”

Mayor Tishaura Jones stated, “I look forward to hearing the findings from the St. Louis Small Business Ecosystem Assessment report, and using it to find new ways that the City can be a better partner to Black and brown small business owners and the entrepreneurs of our future.”

“We have a responsibility to intentionally drive economic inclusion for people that have been left behind,” said Erika Wright, Vice President of Philanthropy at JPMorgan Chase. “The COVID-19 crisis has exacerbated long-standing inequities for Black and Latinx people around the world. This is a moment to heed the strategies identified in this important report to help create and sustain opportunity and racial equity for Black and Latinx communities.”

The full report can be accessed here: St. Louis Small Business Ecosystem Assessment.

 

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