9 (Simple) Steps to Ensure Black Women Don’t Get Left Behind After This Pandemic

Stop waiting for everything to go back to normal, because the goal post has been moved. You can still catch it, this is how.

I rarely take sides in a debate, but let’s have an honest discussion and cut out all of the pomp & circumstance — black women leaders were not truly prepared for Covid-19 and the traumatic impact that it would have on our businesses and careers.

With a host of necessary co-partners out of operation at the moment; such as child care/day care centers, schools, parks, salons, barber shops, restaurants, etc., a new reality of indoor restrictions have hit all Americans with an unexpected force.

However, African American women have a specific challenge.

According the the Institute for Women’s Policy Research, “More than four in five Black mothers (81.1 percent) are breadwinners … There are three times as many single Black mother breadwinners as married Black mother breadwinners.” Nearly half of women-owned businesses in the United States, or 44%, are controlled by minority women, according to Census data and projections by research firm Womenable.

Although African American women traditionally start more businesses and employ more people, they also operate survival-level business models, which are often high-overhead, low-profit margin businesses such as hair salons, coaching/consulting, small or solo law firms, boutiques, book-keeping, etc. According to the Federal Reserve, the average annual sales for businesses owned by black women was $27,752 in 2012, compared to $143,731 for all women and $170,587 for white women.

Why are all of these numbers important?

The CARES Act, which was signed into law in March 2020 to help American’s ease some of the economic burdens of a global shutdown, placed the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) in place, overseen by the Small Business Administration, to assist small businesses with the much needed funding to continue to employ furloughed staff, and basically keep the lights on.

Although the PPP and EIDL sounds great in theory, there is a little hidden caveat in the nearly 800-page legislation that you must consider in order to be eligible for any of these programs — a solid banking relationship.

When you are factoring in a low-margin base of entrepreneurs into a massive economic stimulus, there will be a level of miscommunication, and as more black women cannot gain access to funding, there is a wave of uncertainty among entrepreneurs of color.

What is a banking relationship?

Well, this is not as simple as opening up a business bank account at your local Bank of America branch at the corner. A banking relationship is a lending relationship. When you consider the disinvestment in communities of color, where banks have traditionally underfunded businesses in those communities, it is easy to understand why there was a clear divide in legislative jargon around a “banking relationship.” In recent weeks, I had to bite my tongue as I watch one Instagram or FB Live stream after another filled with misinformation about banking relationships and where you can go to get funding.

The truth is if you have never received funding from a major lending institution, there is a high probability that you will not qualify for the PPP or the EIDL. And let’s unveil another factor that large lending institutions use to determine eligibility — personal and business credit.

A study by the Ewing Marion Kauffman Foundation found that the loan requests of black entrepreneurs are three times less likely to be approved than those of their white counterparts. In addition, women are less likely to apply for bank loans, despite research showing they are no less likely to be approved.

And now, let’s add Covid-19 to the conversation.

So, now we have black women, who do not have a banking relationship, with a low margin business model seeking funding for a survival-level business. The loan that will only guarantee a portion of your annual profit from your P&L statements for the past 2 years. The risk is too high for any lending institution.

We went from race to socio-economic discrimination during a global pandemic. I learned about the implied meaning of banking relationships over a decade ago and although I have tried to teach it to others, most of my advice fell of deaf ears, and for good reason — it is difficult to trust the same institutions that have underfunded your communities intentionally.

However, race and politics aside, it is hard to win a game of chess without the Queen--A strong woman. It is also hard to survive if you operate a low-margin business model in a conservative way by talking yourself out of borrowing capital. Banks want to see a common exchange for value and investment. As women of color, we must stop operating in scarcity due to trust and unsolicited/unqualified advice.

So how can you start building a banking relationship?

• Work on your credit
• Build your reserves in your account(s)
• Request a line of credit against your reserves
• Use it to expand your business
• Make your payments on time
• Increase your reserves
• With every $10,000 more you add to your reserves, ask for a credit line increase
• Buy some real estate
• Leverage the real estate for additional funding

Why am I sharing so much information?

Honestly, I write and research for some of the top tier publications in the world, and have been very fortunate as a business owner for over a decade due to my massive network of high net-worth connections. However, every story that is written about us is written without a proven solution intentionally — I know this firsthand, I’m not guessing. It always talks about the doom and gloom, while omitting a path forward. I am tired of the pity parties for black women.

The happy faces at the top of the headline, with the glimmer of great news are all wonderful stories of successful entrepreneurs and business owners, that received funding and never tell you the full story — They had a banking relationship advantage.

Furthermore, in a post Covid-19 world, black women need to be prepared for the goal-post to be moved once again. The finance industry will make necessary changes to avoid any further risks, and if you are not in the game, you will not know how to be prepared to win.

The goal-post is already MOVING!

If you don’t believe me, try to get a mortgage in today’s lending environment. Today, you need 3–6 months of reserves to qualify during Covid-19, where in a pre-Covid-19 climate, good credit, stable work history and a down-payment secured your path to the American dream. This will create another gap in the home-buying market for families of color. As referenced in the Ewing Marion Kauffman Foundation, the median net worth of the typical black household was $5,677, compared with $113,149 for the typical white household. The mortgage market often determines the business lending goal post.

Today, take the expansion of your business seriously. Don’t avoid scaling due to the fear of borrowing. Start small and build, but you must learn how to borrow if you want a competitive advantage in a larger financial pool in a post Covid-19 world. Please remember, another recession can hit at any moment. I want you to be prepared for it. And please, share this information with others.

Carol Sankar is a high level consultant and the founder of The Confidence Factor for Women in Leadership. She has been featured at TEDx, The Steve Harvey Show, Harvard Business School, The United Way and more. In addition, her work has been covered by Inc. Magazine, Glamour, O Magazine, Forbes, Harvard, Entrepreneur Magazine — to name a few. Carol is also a contributor for Inc., & Entrepreneur Magazine. For more details, visit www.carolsankar.com