Black businesses were slammed by the pandemic-induced recession of 2020.
Although he made a strong comeback in 2021-according to research By Robert Fairley, a professor at the University of California, Santa Cruz—Many Black businesses still have some vulnerabilities that previously existed, such as low cash reserves and difficulty accessing credit relative to other groups.
These vulnerabilities will still exist in the event of another recession, which is increasingly likely.
“If we slip into a recession I predict it will be bad for Black-owned businesses,” Fairley tells WebMD. Forbes, He said many such businesses are already battling the pandemic “and do not have access to large cash reserves, owner assets, or bank loans to weather another recession.”
wall street journal Reported earlier this week That the economists surveyed has dramatically increased the likelihood of a recession, now puts it at 44% over the next 12 months, up from 28% in April and 18% in January. The report noted that a reading at that level is rarely seen outside of an actual recession.
During the last recession, the number of Black-owned businesses fell 31% to nearly 770,000 in April 2020, according to Fairly’s research. Their latest research indicates that Black business ownership ranks 9% above its pre-pandemic level, trailing only Latino business ownership.
OneUnited Bank CEO Kevin Cohey believes Black America is better positioned to weather a recession now than ever before. The economic strength of this demographic will help determine the fate of many Black-owned businesses, especially ones such as OneUnited that serve predominantly black customers.
“As people we are becoming very strong,” Kohei says. “We’re going back and forth from the old model … the last one hired and the first one fired.”
Cohey said he does not believe the Federal Reserve Board will be too aggressive in raising interest rates and triggering a recession. Regardless, he said, the bank is diversifying its revenue streams with products such as business loans and mortgages.
Some black entrepreneurs are preparing themselves for a potential recession. Imani Watts and Alexandria Hadley are co-founders of the apparel company Bazaar Los Angeles. Both started their business in September 2020 during the pandemic. Headley said he hadn’t heard advice on how to prepare for an upcoming recession, but both said they believed the pandemic helped bolster their business. For example, instead of just selling clothing, the company also leases retail space to other smaller, local clothing companies.
“We’ve made a lot of planning about how another pandemic will affect us, so we made sure our business model is resilient and ready to grow,” says Watts.
A growing number of historically black colleges and universities have programs designed to nurture black entrepreneurship, and their leaders think such offerings will be important to young entrepreneurs in the face of a recession. One example is Bowie State University and its Academy of Entrepreneurship, which provides physical space and other resources for more than 500 students to build businesses.
“HBCUs are in a unique position because we are in areas where the needs of black consumers are not being met,” says Jonetta Hardy, executive director of the Entrepreneurship Academy. “If that recession hits, programs like ours will need even more work to help not only nurture ideas, but create ideas that are sustainable.”
, Jair Hilburn contributed to this report.
Credit: www.forbes.com /