The impact of COVID-19 on Detroit’s economy, and the financial disparity that exists for many Black Detroiters resulting from systemic racism, create a nexus for addressing Black business ownership in our city.
According to the Washington Post, the number of Black-owned businesses in the U.S. dropped by more than 40 percent since the onset of COVID-19, far more than other racial groups. One reason is that these businesses often occupy parts of the economy that were forced to close – beauty and nail salons, taxi services and day care centers. They are also located in areas hardest hit by the pandemic – they typically operate on smaller margins and struggle to secure government loans and other aid. With Black business ownership already the lowest in the population, we must take action now or risk losing even more of these establishments.
Importance of Black-Owned Businesses
Black-owned businesses create equity in local commerce. Small businesses and entrepreneurs have long helped build wealth in our society. Successful business ownership translates into many financial benefits for Black Americans, including meaningful savings, property ownership, credit building and generational wealth. As racism continues to affect hiring, career opportunity and upward mobility in 2020, entrepreneurialism is a real alternative to traditional employment.
Supporting Black businesses also means supporting Black communities. Detroit businesses like The Commons and Narrow Way Café have become community spaces for meeting and connection, creating cultural hubs and platforms for engagement. Black-owned small businesses are also more likely to hire from the local community, providing jobs to local residents and stabilizing neighborhoods.
There’s also the ongoing issue of the gentrification of Black neighborhoods, which often includes displacement of Black residents, businesses and culture. Strong commercial corridors filled with successful Black-owned stores keep local communities strong and diverse.
Unlike big-box stores or national chains, many Black-owned businesses celebrate Black heritage and culture and bring access to services specific to the community’s needs. Businesses that reflect the community often foster a sense of pride in the people who live there.
Challenges Black-Owned Businesses Face
A 2017 study by the National Community Reinvestment Coalition found that banks were twice as likely to provide business loans to white applicants than Black applicants and three times as likely to have follow-up meetings with white applicants than Black applicants, even if they’re more qualified. Without access to capital, Black entrepreneurs are less likely to launch new businesses and more likely to fail if lending dries up.
Black-owned business owners also face additional risks and costs associated with urban areas – higher insurance rates, security, blight, failing infrastructure and high rental rates – to name a few.
These challenges will not be erased overnight. However, the DEGC and its partners are creating programs to address gaps in training, scaling and funding, such as the $4 million grant program to help sustain Detroit businesses in early April as the COVID-19 crisis began to impact the economy.
Shop Black-Owned Businesses Now
Revenue is the lifeblood of small business. Sales, orders, foot traffic, word-of-mouth, positive reviews – they sustain business. While government support, programming, assistance and other aid can help a business survive a crisis, only revenue will keep a business open for the long haul.
Today, consumer spending accounts for 70 percent of the entire U.S. economy. Nearly half of all small business purchases are recirculated to local economies, compared to less than 15 percent for chain stores. By supporting Black-owned businesses, shoppers are supporting families and communities. Healthy, vibrant neighborhoods attract investors that provide banking services and loans and promote financial literacy – all of which build economic strength.
Through its mission of creating inclusive economic development, the DEGC is committed to launching and growing neighborhood Black-owned businesses. These business owners take enormous risks to provide the goods and services Detroiters deserve without having to drive outside the city limits.
We encourage everyone to consider the impact of shopping at more Black-owned businesses. Through your spending dollars, you can help strengthen local Black economies, shrink the racial wealth gap, foster Black job creation, and begin an era of true economic justice. The power of purchase is a truly dynamic movement that will help Detroit’s small business community grow in an indelible way.