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Small businesses in LA are in crisis. With less financial cushion and less access to loans, many are in danger of shutting down forever.
Mass small business closures would be a huge blow to our city -- and to BIPOC communities in particular.
What can we do about it? (thread)
Mass small business closures would be a huge blow to our city -- and to BIPOC communities in particular.
What can we do about it? (thread)
When COVID-19 hit LA, almost 14,000 businesses in LA temporarily shut their doors.
And while many have reopened since, it is estimated that about 60% of small businesses across the country are at risk of permanent closure. https://www.yelpeconomicaverage.com/yelp-coronavirus-economic-impact-report.html
And while many have reopened since, it is estimated that about 60% of small businesses across the country are at risk of permanent closure. https://www.yelpeconomicaverage.com/yelp-coronavirus-economic-impact-report.html
BIPOC-owned businesses have been less likely to get funding under the federal government’s Paycheck Protection Program.
Businesses in Leimert Park, Chinatown and Boyle Heights got less support than businesses in three mostly-white LA neighborhoods. https://www.washingtonpost.com/business/2020/07/31/ethnic-enclaves-gentrification-coronavirus/?arc404=true
Businesses in Leimert Park, Chinatown and Boyle Heights got less support than businesses in three mostly-white LA neighborhoods. https://www.washingtonpost.com/business/2020/07/31/ethnic-enclaves-gentrification-coronavirus/?arc404=true
Small businesses are at a huge disadvantage in this crisis.
They have only a two-month financial cushion on average, making them vulnerable to being gobbled up by bigger firms. https://www.nfib.com/content/press-release/economy/covid-19-impact-on-small-business-part-3/
They have only a two-month financial cushion on average, making them vulnerable to being gobbled up by bigger firms. https://www.nfib.com/content/press-release/economy/covid-19-impact-on-small-business-part-3/
Losing small and BIPOC-owned businesses would damage our local economy in several ways.
First, small businesses create far more jobs per sale than large chains do.
Big-box stores, by contrast, actually reduce overall employment through consolidation.
https://cdn.ilsr.org/wp-content/uploads/2011/12/SFRDS-May07-2.pdf
First, small businesses create far more jobs per sale than large chains do.
Big-box stores, by contrast, actually reduce overall employment through consolidation.
https://cdn.ilsr.org/wp-content/uploads/2011/12/SFRDS-May07-2.pdf
Small business is the fuel that powers LA’s economic well-being.
On average, 48% of each purchase at an independent business is recirculated locally -- compared to less than 14% of purchases at chain stores. https://www.amiba.net/resources/multiplier-effect/
On average, 48% of each purchase at an independent business is recirculated locally -- compared to less than 14% of purchases at chain stores. https://www.amiba.net/resources/multiplier-effect/
Black- and Latinx-owned small businesses are a vital driver of intergenerational wealth creation.
Allowing COVID to sink these businesses would widen our racial wealth gap at a time when we can’t afford to move backwards.
http://www.urban.org/sites/default/files/publication/24491/904611-closing-the-wealth-gap-empowering-minority-owned-businesses-to-reach-their-full-potential-for-growth-and-job-creation.pdf
Allowing COVID to sink these businesses would widen our racial wealth gap at a time when we can’t afford to move backwards.
http://www.urban.org/sites/default/files/publication/24491/904611-closing-the-wealth-gap-empowering-minority-owned-businesses-to-reach-their-full-potential-for-growth-and-job-creation.pdf
At the federal level, PPP was set up in ways that pushed small businesses to the back of the line.
CA, meanwhile, is allowing businesses to defer their taxes, and it’s created a Small Business Disaster Relief Loan Guarantee Program.
But it’s not enough. https://covid19.ca.gov/business-and-employers/
CA, meanwhile, is allowing businesses to defer their taxes, and it’s created a Small Business Disaster Relief Loan Guarantee Program.
But it’s not enough. https://covid19.ca.gov/business-and-employers/
What’s not being addressed is how small businesses will be able to pay back landlords after the emergency period ends.
In LA, businesses will have only 3 months to repay any rent owed. This could mean an avalanche of bankruptcies and evictions. https://www.paulweiss.com/practices/transactional/coronavirus-covid-19-relief-center/practice-overview/other-states/california/commercial-evictions-moratorium
In LA, businesses will have only 3 months to repay any rent owed. This could mean an avalanche of bankruptcies and evictions. https://www.paulweiss.com/practices/transactional/coronavirus-covid-19-relief-center/practice-overview/other-states/california/commercial-evictions-moratorium
A CA Senate bill tried to address small business debt by allowing tenants to break their leases if landlords didn’t renegotiate with them in good faith. But it was killed after lobbying from landlord groups.
That leaves it up to cities to find a solution. https://www.bizjournals.com/sanfrancisco/news/2020/06/18/ca-bill-sb-939.html
That leaves it up to cities to find a solution. https://www.bizjournals.com/sanfrancisco/news/2020/06/18/ca-bill-sb-939.html
LA announced a Small Business Emergency Microloan program back in March, which was authorized to provide $11 million in no-fee rescue loans ranging from $5,000 to $20,000.
Unfortunately, it’s been slow in getting on its feet, and too small to meet demand. https://www.lamayor.org/mayor-garcetti-announces-economic-relief-package-small-businesses-impacted-novel-coronavirus
Unfortunately, it’s been slow in getting on its feet, and too small to meet demand. https://www.lamayor.org/mayor-garcetti-announces-economic-relief-package-small-businesses-impacted-novel-coronavirus
Two months after its announcement, LA's microloan program had received nearly 25,000 applications, processed 3,856 of them, and approved loans to only 114 businesses.
Approximately 20,000 applications were returned because of incomplete documentation. https://www.losfelizledger.com/few-of-citys-covid-19-microloans-approved/
Approximately 20,000 applications were returned because of incomplete documentation. https://www.losfelizledger.com/few-of-citys-covid-19-microloans-approved/
In May, our mayor called for LA’s microloan program to reassess denied applications, ease restrictions, and expand the team charged with distribution.
But even now, 3 months later, only half of the funds have been distributed to a total of 419 businesses. https://lacontroller.org/data-stories-and-maps/microloans/
But even now, 3 months later, only half of the funds have been distributed to a total of 419 businesses. https://lacontroller.org/data-stories-and-maps/microloans/
In addition to LA’s small business microloan program moving too slowly, it hasn't been made clear why so many applications have been rejected.
Meanwhile, the sheer volume of applicants indicates that the amount of need far exceeds the $11 million allocated by the city.
Meanwhile, the sheer volume of applicants indicates that the amount of need far exceeds the $11 million allocated by the city.
We need to make implementation of LA’s microloan program faster, more transparent, and more accessible.
It’s imperative that it doesn’t replicate the failures of PPP, which disproportionately benefited large businesses and exacerbated racial inequalities in access to credit.
It’s imperative that it doesn’t replicate the failures of PPP, which disproportionately benefited large businesses and exacerbated racial inequalities in access to credit.
There are so many things LA can do to support small businesses.
We could enact a business diversity ordinance like San Francisco's. https://ilsr.org/san-francisco-dealing-chains/
We could reserve space in new commercial developments for small businesses like Austin does. https://ilsr.org/rule/set-asides-for-local-retail/
We could enact a business diversity ordinance like San Francisco's. https://ilsr.org/san-francisco-dealing-chains/
We could reserve space in new commercial developments for small businesses like Austin does. https://ilsr.org/rule/set-asides-for-local-retail/
As LA looks at reallocating funding away from policing, funds could be made available to expand credit for Black-owned enterprises.
One way to manage this would be to charter a public bank, which could invest in businesses that help their communities. https://www.latimes.com/california/story/2019-10-11/public-bank-los-angeles-idea
One way to manage this would be to charter a public bank, which could invest in businesses that help their communities. https://www.latimes.com/california/story/2019-10-11/public-bank-los-angeles-idea
If small and BIPOC-owned businesses in LA are allowed to fail, the city we inhabit post-pandemic will be both culturally and economically devastated.
We need to take every possible action to keep them afloat -- so LA remains the vibrant, diverse metropolis we love.
We need to take every possible action to keep them afloat -- so LA remains the vibrant, diverse metropolis we love.
