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Pandemic highlights the extra hardships faced by black business owners

Shutting down the U.S. economy in an effort to control the coronavirus outbreak came at enormous cost to American businesses. But the damage borne by African American entrepreneurs has been especially significant. Paul Solman reports on how black business owners face additional challenges -- from racism among customers to a lack of financial support -- even when economic circumstances are strong.

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  • Judy Woodruff:

    As we have been hearing this hour, shutting down the U.S. economy over the coronavirus outbreak came at enormous cost to American businesses.

    But, as Paul Solman reports, the impact on African-American entrepreneurs has been especially harsh.

    It's the latest installment of Making Sense.

  • James Mack:

    A watch like this a man will really appreciate.

  • Paul Solman:

    Doing small business is beyond tough these days. But think of what you're up against if you're African-American.

  • James Mack:

    I have been asked, is this real, many, many times. I have been asked, this is not stolen, which was absolutely appalling. They ask, who owns this business, because it's such a nice, upscale store.

  • Paul Solman:

    James Mack's dream come true, his own jewelry store in Charlotte, North Carolina. But there's at least one major hurdle: his race.

  • James Mack:

    A lot of people say that maybe, you know, you should hire someone of a Caucasian or a Mexican descent to stand in the front. But it's like, you know, when do we get the respect of running a business at a high level?

  • Terence Dickson:

    These are all famous people and tell a great story, Cassius Clay, right before he was Muhammad Ali.

  • Paul Solman:

    African-American-art adorns Terence Dickson's Terra Cafe, opened in Baltimore 11 years ago, despite lacking what many entrepreneurs almost take for granted.

  • Terence Dickson:

    Normally, you know, you go to business school, they said, you need a business plan. You need six months of revenue. You need six months of payroll.

    The average black business starts with about 1,500 bucks and a couple halfway credit cards and a dream.

  • Paul Solman:

    African-American businesses are hamstrung from the start, says economist Robert Fairlie, since half of African-American families have less than $9,000 in wealth.

  • Robert Fairlie:

    White families have $130,000. That contributes to the lack of ability to find financial capital to start a business. It contributes to the lack of financial capital to grow that business. So, that wealth gap is a big problem.

  • Andre Perry:

    Black people represent about 13 percent of the population, but only about 4 percent of the overall number of business owners.

  • Paul Solman:

    And Andre Perry of the Brookings Institution says it's not for lack of drive.

  • Andre Perry:

    It's probably more because of a lack of access to capital. Black businesses receive less loans. And when we do get loans, they're at a much higher interest rate.

  • Paul Solman:

    It's been like this pretty much forever. Virginia Ali, now 86, and her husband founded Ben's Chili Bowl in 1958 in Washington, D.C.

  • Virginia Ali:

    We found challenges when we opened it. We found that it wasn't easy to get the financing if you wanted to expand and things like that. That's the way we found it.

  • Paul Solman:

    True 62 years ago, when the Chili Bowl opened in segregated D.C. Still true for James Mack today.

  • James Mack:

    It is hard as an African-American to get big funding, you know, even small funding, even micro loans, to get that. And I have excellent credit. I own property and everything.

  • Paul Solman:

    Terra Cafe's Terence Dickson, who mentors African-American business owners, once went to the bank with a group of them.

  • Terence Dickson:

    The only thing that we wanted was a business credit line, as easy as, let us deposit this $1,000 in, and give us a business credit line. They gave us donuts. We got coffee and water.

    They say, we appreciate you, and thank you. That's it. AKA, get the hell out.

  • Paul Solman:

    Compare that to white entrepreneurs.

  • Terence Dickson:

    They have family, all right, that are helping them. They have an education of some type that is helping them. And, see, it started before they even started with business.

    If I'm a black family, and I'm struggling just to keep the roof over my head and food on the table, I don't know about savings. I don't know about IRAs. I don't know about business structure. I just know that I got enough this week to pay the light bill and bring some groceries in, and I will get the rest of the rent next week.

  • Paul Solman:

    Yes, says economist Fairlie:

  • Robert Fairlie:

    The racial gap in wealth, the racial gap in education, this racial gap in family business ownership, you put all those factors together, and that's what's contributing to why I say a young person today who's African-American has a much lower chance of starting up a business and running a successful business than someone who's white.

  • Paul Solman:

    And the pandemic has reduced the number of African-American businesses by 41 percent.

  • Robert Fairlie:

    Twice as high as it has been for white-owned businesses.

  • Paul Solman:

    To what do you attribute the greater impact on black businesses of COVID-19?

  • Robert Fairlie:

    It was partly because of the industries that black owned businesses are in, that, often, these are smaller scale businesses that were shut down that weren't deemed essential. And so that's created problems.

  • Paul Solman:

    But wait. The Paycheck Protection Program, or PPP, signed by President Trump, was supposed to aid small businesses.

  • Andre Perry:

    When the Treasury announced that they would be distributing these funds through mainstream banks, I immediately rolled my eyes in frustration, because we know that mainstream banks have long had a sordid history with black business owners.

    They essentially worked with their existing customers, many of which were not black people. So, structurally, it was set up where black people would get less money.

  • Paul Solman:

    Now, the Treasury has set aside funds for firms that lend to underserved communities. Still:

  • Vida Ali:

    For black businesses, it's very difficult at this time.

  • Paul Solman:

    Virginia Ali's daughter-in-law, Vida, also works at Ben's Chili Bowl. They did get a PPP loan, but it's not enough.

  • Vida Ali:

    Business was down 80 percent on U Street and all other Ben's Chili Bowl were closed. We just reopened our H Street location a couple of weeks ago. But business is still down 70 percent.

  • Terence Dickson:

    We're not going back to business as usual. That's done.

  • Paul Solman:

    Terence Dickson's lounge room sits empty. His cafe is open for takeout only. So he's developing safety measures to reopen.

  • Terence Dickson:

    How do you eat an elephant? All right, one small bite at a time. So, I think that how do we work our way out of this corona? One small bite at a time.

  • Paul Solman:

    Simone Charles had 56 dates booked in her Cincinnati event space. But by the end of March?

  • Simone Charles:

    We literally had three events left.

    We were looking at opening reopening our doors the beginning of June. However, with the protests, a lot of our clients who were scheduled to do tours have reached out saying that they feel uncomfortable, wanting to postpone those tours.

  • Paul Solman:

    Charles reopened just yesterday. James Mack hopes to soon. He's still cleaning up after his store was broken into amidst the protests in Charlotte. Security cameras captured the incident.

  • James Mack:

    I mean, not being able to do business in that time frame is extremely hurtful.

    We are just trying to climb back, claw our way back, you know, without losing our space, without losing our business. And then we have another hurdle to go over, not taking away from any of the protests or any of the demonstrations at all.

    But, you know, hurting African-American businesses in the meantime is only bringing us down more in an economic situation where we are trying to rise up.

  • Paul Solman:

    Mack, Charles and Dickson all support peaceful protests. And so does Virginia Ali, whose Ben's Chili Bowl was the only restaurant allowed to stay open past curfew in Washington during the 1968 riots.

  • Virginia Ali:

    I love the protesters. I think they are making a difference now in our country. And I want them to continue to be persistent and peaceful. We have got to get positive change. We have got to do that before I leave this Earth, Paul.

  • Paul Solman:

    This is Paul — Solman — reporting for the "NewsHour."

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