For many of us, connections to small businesses are deeply personal—your local barber shop or family dentist, the spot for the best pizza in town, the small contractor you call to fix your leak.
Businesses like these make up the fabric of our communities—but many don’t realize what a big role they play, collectively, in the U.S. economy.
However, they face unique challenges even in the strongest of times and now, amidst the covid-19 pandemic, many small businesses are struggling to survive.
The situation at hand
JPMorgan Chase Institute research found that prior to the covid-19 pandemic, typical small businesses had only enough cash on hand to keep the lights on for two to three weeks. This was even more pronounced for small businesses in majority-Black and Latinx communities, where the typical business had only one to two weeks of reserves.
Interestingly, researchers found that in the Fall of 2020, many small businesses actually had cash reserves at higher levels than normal. This seems like great news—but when you look under the hood, the situation is more precarious. 
There are two factors to explain the elevated reserves: 1) an injection of cash from federal and local policy shored up many of the businesses likely to face a shortfall, and 2) a decision many businesses made to delay or dial back payments on things like upkeep of key assets, limiting wages or employee benefits, or other choices that may not be financially healthy in the months or years ahead.
So, while cash balances are larger than usual, they may not be enough for small businesses to continue to survive in these tumultuous times. Expenses have already begun to outpace revenue. This trend could have a disproportionate impact on Black- and Latinx-owned companies, that tend to experience lower revenues and profit margins compared to white-owned counterparts.
Help in many forms
Many small businesses face similar challenges: lack of access to capital and resources to grow. However, businesses owned by people of color and other underserved groups face these challenges more acutely. For example, according to the JPMorgan Chase Institute, Black, Latinx and women-owned small businesses are underrepresented among firms with substantial external financing. While there are no simple solutions, business, government and nonprofit leaders should work together to support, sustain and grow these critical enterprises.
For example, December’s $900 billion stimulus package included a second infusion of PPP funds, with $12 billion set aside for Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs).
While the terms might be unfamiliar, you likely already know your local CDFI or MDI. Some local banks or credit unions might fall into this category.
An MDI is a bank whose ownership or leadership is made up of a majority of people of color. CDFIs are community lenders, which primarily finance in low- and moderate-income communities and focus on small businesses, as well as affordable housing and nonprofits. Both MDIs and CDFIs earn these designations from the federal government, due to the vital financial services they provide in communities that are often underserved. CDFIs in particular are designed to meet these needs by offering capital and guidance to help ensure the success of vulnerable businesses. We think that’s a winning combination.
But MDIs and CDFIs need banks to provide additional capital to fund this critical work in communities. Here’s where JPMorgan Chase comes in.
Part of the solution
We believe that business has a role to play in addressing societal issues, along with business and community leaders. JPMorgan Chase is committed to building a more inclusive economy and our support for small business, especially in Black and Latinx communities, is a critical element of this work.
That’s why, in February, the firm announced new initiatives focused on providing MDIs and diverse-led CDFIs with additional access to capital, connections to institutional investors, specialty support for Black-led commercial projects, and mentorship and training opportunities. Initial investments and commitments to minority-owned and Black-led MDIs included Liberty Bank and Trust, M&F Bank, Carver Federal Savings Bank and Broadway Federal Bank. The firm also committed $42.5 million to expand the Entrepreneurs of Color Fund to reach new U.S. cities in 2021, providing loans and technical assistance to minority-owned small businesses in collaboration with LISC and a network of CDFIs. Since its inception in Detroit in 2015, the Entrepreneurs of Color Fund has deployed more than $32 million to Black, Latinx and other underserved entrepreneurs, including Jimmie Williams from Chicago, who received a small business loan to scale his landscaping company. In addition, we continue our direct support for small business, including through PPP.
This work is part of the $30 billion commitment over five years we announced in October 2020 to provide economic opportunity to underserved communities to help close the racial wealth divide. The firm is continuing to put this commitment into practice by combining our business, policy, data and philanthropic expertise.
We are committing $350 million over five years to help grow Black, Latinx, woman-owned and other underserved small businesses. This includes:
Philanthropy, low-cost loans and direct equity investments: Supporting the signature Ascend Program, helping build the capacity of diverse-led nonprofits across the globe to more effectively support entrepreneurs, and investing in early-stage businesses to help companies drive economic opportunity, including in Black and Latinx communities. Last month we made our initial direct equity investment in Bitwise Industries.
Policy: Releasing new data-driven policy solutions such as increasing resources for the Small Business Administration (SBA) Microloan program, which provides loans of up to $50,000 to help small businesses. The firm will support advancing these policy reforms to help address the immediate and long-term challenges small business owners face.
Supplier diversity: Spending an additional $750 million with Black and Latinx suppliers, and co-investing up to $200 million in middle market businesses that are or will be minority owned via a new initiative with Ariel Alternatives.
Wrap-around support: Launching a nationwide Minority Entrepreneurs program to help entrepreneurs in historically underserved areas access 1:1 coaching, technical assistance and capital.
Together, these commitments will help reduce barriers to capital access and support the growth of thousands of additional underserved businesses.
Read the full article on the Washington Post.