So, when Gov. Gavin Newsom announced $500 million in grant funding and a temporary tax relief package for small businesses last month, it seemed like a sign of hope. And while we agree that any aid at this moment is a step in the right direction, a closer look reveals a plan that is too simplistic, flawed and ignores many crucial considerations needed to help BIPOC-owned and rural small businesses access these grants.
Paulina Gonzalez-Brito & Tate Hill
In his announcement, Newsom cited data from the Census Current Population Survey which found active businesses owned by Black, Latinx, Asians and immigrants dropped by 41%, 32%, 25% and 36%, respectively. The good news here: Newsom acknowledges that these businesses are struggling far more than small businesses owned by non-BIPOC people. The bad news: the plan doesn’t do enough to prevent further drop-off.
If Newsom wants to provide a lifeline for the most underserved small businesses, he urgently needs to reimagine his approach to avoid a situation similar to the distribution of Paycheck Protection Program loans earlier this year, where Black-owned small businesses received just 2% of the loans and Latinx-owned small businesses received only 6%. This reimagining has to begin and end with distributing grants first to microenterprises, small businesses with the lowest annual revenues and small businesses that were left out of the PPP loan program.
Here are additional protections that need to be implemented in this relief package to better serve BIPOC-owned and rural small businesses:
First, community development financial institutions and other community-based organizations must be involved. These are organizations that can perform outreach to rural areas, indigenous communities and communities where economic infrastructure is lacking due to historical disinvestment and exclusion by financial institutions. They ensure small businesses can fill out applications, navigate systems and assist with the collection of required documents. More than one-third of small businesses needed support in applying for PPP loans, according to our data. The same will be true for this grant program.
Second, adjust the application process. The application needs to be made available in the five most commonly spoken languages in the state and designed so that it is accessible for small businesses that are not technologically well-equipped. Many small businesses, especially those in rural parts of the state like Fresno, Stanislaus and Kern counties, may not have stable internet connections, access to computers or smartphones. Online-only documentation fails to level the playing field for small businesses.
Third, establish a selection lottery in which grant applicants who fit multiple attributes of being in an underserved group and operate in low-income communities have a higher grant award rate than applicants who fit fewer attributes.
Fourth, small businesses that require extra assistance to navigate the grant process need more time to ensure they get adequate support. Specifically, rural, tribal, microenterprises, small businesses that have not received PPP loans, and other underserved small businesses.
Lastly, race, ethnicity and detailed geographic data needs to be collected, made public and reported regularly. Taxpayers have a right to know that these funds were used to support the most disadvantaged and historically excluded small businesses, rather than small businesses that have the resources to jump to the front of the line.
California leads the country in establishing policies that protect BIPOC communities. If the state wants to preserve its reputation as a leader in prioritizing equity in its policymaking, then it must act fast to save BIPOC and rural small businesses.
The authors wrote this for CalMatters, a public interest journalism venture committed to explaining how California’s Capitol works and why it matters.
About the Authors
Paulina Gonzalez-Brito is the executive director of the California Reinvestment Coalition, firstname.lastname@example.org. Tate Hill is the executive director of Access Plus Capital, a small business loan fund for low- and moderate-income entrepreneurs, email@example.com.