The Regulatory Review: Small Businesses of Color Matter Too

The Regulatory Review, October 18, 2020, Small Businesses of Color Matter Too

Small businesses are crucial to the vitality of the United States economy, and accounts for 99.9% of all U.S firms and makes up half of the private sector employment. Most minority businesses, are small businesses and due to the systemic injustices there needs to be protections for lender treatment of minority-owned businesses especially in regards to the affect of the Covid-19 pandemic.

The death of George Floyd while in police custody has ignited long developing and smoldering embers of rage and frustration with systemic inequalities in criminal legal systems.

These systemic inequalities also exist outside of the justice system, where they pervade economic and administrative systems. Regulators and lawmakers should address these inequalities to allow small businesses of color the same opportunities that their white counterparts enjoy. Since most minority-owned businesses are small businesses, lenders’ treatment of these minority-owned small businesses is crucial to ensuring economic justice in the United States—especially in the wake of the COVID-19 pandemic and ensuing recession.

Small businesses are critical to the vitality and growth of the U.S. economy. Defined as firms that have less than 500 employees, small businesses account for 99.9 percent of all U.S. firms and nearly half of all private-sector employment. The Consumer Financial Protection Bureau estimates that these firms collectively represent a $1.4 trillion market. In 2014, the 30.7 million small businesses in the United States generated close to half of the U.S. gross domestic product.

Against this backdrop of small business activity, the success and growth of small businesses of color transform individual lives and society. For example, minority-owned businesses create equity in local commerce. Small businesses and entrepreneurs have long helped build wealth in our society. Successful business ownership translates into many financial benefits for people of color, including meaningful savings, property ownership, credit building, and generational wealth.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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