By Lee Chilcote
Waverly Willis recently took out a tape measure at his home. The black entrepreneur, who owns two Urban Kutz barbershop locations in Cudell and Old Brooklyn, wasn’t trying to measure his mangy hair or beard which he let grow during the Covid-19 shutdown; rather, he was trying to size up the stack of unpaid bills on his desk.
“I literally have a foot of bills at home,” says the barber, who also teaches at a barber college. “Just for fun, I wanted to measure it. It’s, like, 12.1 inches of bills.”
When Willis was forced to shut down in mid-March after Ohio Governor Mike DeWine ordered all hair and nail salons, tattoo parlors and barbershops to close, he knew he’d have trouble paying his bills, so like many business owners, he looked around for resources to help.
Although he applied to the federal Paycheck Protection Program (PPP), he was turned down. He also has not yet received any type of unemployment assistance. Studies show that small businesses owned by people of color have been hit especially hard by Covid-19. A recent survey by Global Strategy Group revealed that just 12 percent of black and Latino businesses reported receiving what they asked for from PPP.
“I applied for everything and didn’t receive anything,” says Willis. “I kept running into the speedbump of, ‘Show me your payroll,’ and I was like, ‘What payroll, bro? They pay me rent.’” Willis believes he was denied PPP because his workers are independent contractors, which he says made him ineligible.
PPP shuts out many small, minority-owned businesses
Lamont Mackley, chief inclusion and outreach officer for the nonprofit economic development organization Jumpstart Inc., says the first round of PPP was not equitably distributed and tended to benefit larger, white-owned firms.
First, he says, many minority-owned businesses don’t have relationships with large banks which were responsible for processing applications. Second, many banks chose to work with existing customers who took out larger loans because it was easier and more profitable. Finally, many minority entrepreneurs either weren’t eligible for PPP or needed more help in applying for the funds.
“A lot of these businesses are small and they didn’t see this one coming, so they’re not prepared for a crisis,” says Mackley. “Many of them don’t have relationships other than maybe a checking or savings account with the banks that were going to be responsible for providing the resources to the public.”
“Some of the banks didn’t take applications for entrepreneurs who were not already existing customers, which is right away a slap against minority-owned businesses that hadn’t developed these relationships,” he adds.
“Think about it – you’re in crisis, there’s a panic about what’s going on, customers are no longer coming to you, the governor is shutting down industries, and all of a sudden you have to fill out an application. It’s mind-boggling. A lot of entrepreneurs needed hand-holding to even apply for it.”
Local efforts help fill the gap
In the past few months, local organizations and leaders have rushed to fill in the gap. For example, Cuyahoga County has been working with partners from across the region to award over $6 million in loans and grants through a small business stabilization fund. The city of Cleveland has offered $10,000 emergency working capital loans and $25,000 restoration working capital loans to small businesses, especially those unable to access other forms of relief. The city is also offering $20,000 loans to specially-impacted businesses such as barbershops and salons.
Information provided by Cuyahoga County shows that 39 of the 163 grants given out in the first round of stabilization funds were to minority-owned businesses, while 113 of the 163 grants were to minority-owned or women-owned businesses. Fifty six percent were in the city of Cleveland. In round two, 312 of the 751 businesses recommended for funding are minority-owned or women-owned.
Many minority entrepreneurs need technical assistance navigating the applications for these programs. Jumpstart, the Urban League and other groups have also been reaching out to them through one-on-one conversations. They’ve also hosted webinars on social media that have attracted sizeable audiences.
“I did get a lot of traction from the webinars I hosted,” says Shashonna Duckworth, Director of the Small Business Development Center at the Urban League of Greater Cleveland. “We were really aggressive in saying, ‘Even if you think you might not qualify, you might.'” Each webinar attracted around 30-50 people, she says.
One of the people who has been helped by outreach efforts is Lisa McGuthry, owner of Our Favorite Things boutique on Larchmere. She shut down her business nearly three months ago, and although she’s been selling products online and is now open for curbside pickup, she hasn’t fully reopened yet.
McGuthry received $20,000 through PPP, an amount that was less than what she applied for but allowed her to pay her employees. She applied for a $10,000 loan from the city of Cleveland, but did not receive it. She applied for a Small Business Association (SBA) economic disaster loan, but is still waiting.
Restarting her business has been hard, she says. “It’s very stressful and time-consuming,” she says. “Looking at all this Zoom stuff, taking online courses, trying to pivot and do things we’ve not done before, all while trying to keep my head above water … It shouldn’t take this long to get assistance.”
Willis also recently received a $10,000 loan from the city of Cleveland and reopened both barbershop locations after doing a deep clean and enacting health and safety measures. “I’ve always been a person who does things myself,” he says. “I’m going to do what I do, cut hair and teach at the barber college.”
Providing longer-term help
Despite the fact that these local efforts have been effective, they still likely pale in comparison to the need, and many small business organizations worry about the businesses they’re not reaching. Danielle Sydnor, former director of the Economic and Community Development Institute (ECDI) and founder of We Win Strategies, says the botched rollout of PPP’s first round scared many people away.
“What seemed like it was going to be this huge relief has really caused this huge confusion,” she says. “When people get confused, sometimes the easier thing to do is just stay away.”
Sydnor says that although local stabilization efforts are an effective stopgap measure that is helping many black and brown entrepreneurs, more help is needed from the federal government and the rules should be more flexible. Local economic development organizations will also need to develop more capacity.
”Everyone ran very quickly to come up with something to stabilize people,” she says. “But after that, we’re looking at an 18 to 24 month recovery process for most businesses. What are we going to do over the next 18 to 24 months to ensure that these businesses that are still trucking along don’t fall out of participation?”
Local organizations are already pivoting to providing loans instead of grants to many small businesses, and work is underway to deploy that funding now.
Even though more help may come, entrepreneurs are going to have to be self-sustaining, Duckworth says. “This is the new norm now,” she says. “Some additional funds may be coming down, but entrepreneurs need to pivot to where they can run their businesses and function without that.”
Although there are still problems with PPP, the second round helped more minority clients, she adds. “We were able to work through smaller banks and a lot more got through,” she says. “More sole proprietors and single member LLCs were able to take advantage of the program.”
Chef Jose Melendez, a formerly homeless chef who now runs a successful food business catering weddings and other large events, received $2,500 from the Cuyahoga County stabilization fund and about $6,000 from the second round of PPP. That’s still far less than the $15,000 he lost in March, but he’s now booking weddings for August and into next year while also pursuing his long-held dream of opening a restaurant.
“Coming from a background where I used to be homeless, I feel like I’m blessed,” he says. “I’ve learned to go around obstacles.”