The coronavirus pandemic dealt a heavy blow to small businesses owned by older Americans from minority groups, and Asian-owned firms were particularly hard hit by closures and revenue declines, according to research released on Tuesday by the New York Federal Reserve and AARP.
Older business owners, especially those in racial minorities, also found it more difficult to access government aid, requiring some of them to take pay cuts or tap into their own savings to stay open, reports Reuters citing the media release.
“This illustrates the profound disruption the pandemic caused to small businesses and the stress it’s placed on older business owners’ financial health,” Claire Kramer Mills, assistant vice president at the New York Fed, said in a statement.
Despite going into the pandemic with more savings than their younger counterparts, small business owners who were 45 and older shut down their operations at higher rates and have experienced a slower recovery. For example, 25 per cent of small businesses owned by people in that older group closed down at the height of the crisis last spring, compared to 20 per cent of small businesses overall.
Small business ownership for people under the age of 45 rebounded more quickly and was down 2.0 per cent overall as of January. But for people 45 and older, it was still down by 9.0 per cent.
The small businesses owned by older people from minority groups struggled with shutdowns and revenue losses more than white business owners in the same age group - and Asian-owned businesses faced greater pain.
Some 90 per cent of small firms owned by Asians aged 45 and above saw their revenue drop last year, with those owned by older Blacks close behind at 85 per cent and those owned by older Hispanics at 81 per cent. That compared to 77 per cent of businesses owned by older whites and 78 per cent of businesses overall in that age group.
SLOWER REBOUND
Small businesses owned by older members of minority groups also faced higher rates of closures in the early months of the pandemic and are bouncing back more slowly. Small business ownership among Asians aged 45 and higher was down 19 per cent in January 2021 when compared to a year earlier. It was down 16 per cent for Blacks in that age group and 11 per cent lower for Hispanics.
Most older small business owners sought relief through the US government’s Paycheck Protection Program, which offered forgivable loans to that group, but minority-owned businesses had less success securing needed funding.
Some 81 per cent of small firms owned by whites aged 45 and older received the full amount requested. But that dropped to 71 per cent for those owned by Asians in the same age group, 63 per cent for those owned by Hispanics, and 46 per cent for those owned by Blacks. About one in five older Black small business owners said they received none of the requested financing.
Adding to their challenge: Small businesses owned by minorities were in worse financial shape heading into the pandemic, the report showed.
Some 19 per cent of Black-owned small businesses were financially “distressed” as of 2019, along with 16 per cent of those owned by Hispanics and 9.0 per cent of those owned by Asians.
“People of colour who own small businesses were more likely to borrow from personal networks or against their home or retirement accounts,” the New York Fed’s Kramer Mills said.
The research was conducted by the Fed regional bank and the AARP, a non-profit organisation that provides programmes, information and services for Americans over the age of 50.
