By GWEN MURANAKA. Rafu Senior Editor
As L.A. County moves into Phase 3 of reopening the economy, many mom-and-pop businesses, particularly those owned by minorities and women, are being left behind.
Only 12 percent of African American and Latino businesses and 25 percent of Asian American businesses received stimulus fund loans. Overall, 90 percent of minority and women founded business were shut out of the Paycheck Protection Program (PPP).
In a briefing by Ethnic Media Services, experts outlined the challenges small businesses faced in the first round of stimulus and how they are adapting to survive the COVID economy.
L.A. County’s COVID-19 death toll stood at nearly 3,000 Tuesday, and nearly 1,100 new cases of the disease were confirmed — including 41 reported in Long Beach and Pasadena — boosting the number of cases to 73,832.
Despite those numbers, businesses that were closed due to COVID-19 are starting to open up.
Underscoring the challenges faced by businesses, the county’s public health director, Barbara Ferrer, said Monday that inspectors visited 2,000 restaurants over the weekend, and half of them were “still not in compliance” with health requirements.
“They’ll be revisiting all of the restaurants that were not in compliance and issuing them an order to come into compliance,” Ferrer said.
Even though hair and nail salons are beginning to see customers as of June 19, Sumita Batra, CEO of Ziba Beauty, says her stores will remain closed until they have established health and safety protocols to their satisfaction. Her mother, Kundan “Kelly” Sabarwal, a native of Iran, founded the company in 1988 in Artesia, and Ziba has 100 employees and 14 locations, mainly in Southern California malls.
“We ended up creating an industry within beauty, threading. It got knocked off and became a global industry,” Batra said.
During the week of March 11, Ziba was opening its 14th location in the Century City shopping center.
“On Monday, we were coming up with ideas for grand opening. On Wednesday, we are laying off entire team and closing that store,” Batra said.
She ended up laying off all her staff so they could collect unemployment and pay vacation time and rent of more than $150,000.
“After a week of feeling sorry for myself, I thought what can I do. I didn’t know anything about e-commerce. Fast forward, we had a team working on it, but it’s not even 10 percent of what we had,” Batra said.
She said she was able to get PPP funds because she was “lucky.”
“I used every contact in my book. Got approved on April 16, didn’t get funds until last week,” Batra said. “No one is talking about the bills that accumulated from the day I closed all the way until day I received my funds. My landlord wants their money.”
Batra said she feels a sense of responsibility to create safety protocols for the threading industry to open up in a responsible manner.
“Nail industry and us, we need to come together to partner and create a safe environment and it is possible, and it will take time,” she said.
Charles Phillips, a Class A director of New York’s Federal Reserve Bank, said because the first round of PPP loans was structured on a first-come, first-served basis, smaller financial institutions and in turn, their clients, were unable to compete.
He also used the example that for a barbershop, which rents chairs, payroll isn’t the largest expense.
PPP was set up to cover payroll and other essential costs. The full amount of the loans may be forgiven if borrowers use the proceeds to maintain their payrolls and pay other specified expenses. June 30 is the final deadline to file for PPP.
Many small minority business owners are funded through Community Development Financial Institutions (CDFI), but Phillips said CDFIs didn’t have access to the first round of PPP funds.
“Only 90 participated in PPP program. The reason is they were not part of Small Business Administration program. They didn’t know how to apply to that program, because that is usually done with larger banks.”
He also noted, “Many customers filled out forms incorrectly and the rules keep changing.”
In hindsight, the Fed representative said SBA was not the best choice to disburse the funds.
“Should have picked the 30 largest banks to get it started and force them to cover everybody. They could do it to scale,” he observed.
Phillips said that the second round of PPP loans has gone to smaller financial institutions and their clients and that CDFIs are learning to adapt to the new normal.
“If you go to CDFI now, the process will be easier. CDFIs have to learn, don’t do the normal 30- to 60-day documentation process. As long as it looks legitimate and you know them, process the loan,” Phillips said.
Rep. Ted Lieu (D-Torrance) said the $3 trillion Heroes Act passed last month by the House of Representatives addresses a lot of the gaps from the first stimulus bill, but it has yet to be taken up in the Senate.
Lieu explained that his parents owned a gift store, so he understands the struggles of minority business owners. One of the changes to the fourth stimulus bill, which provided an additional $300 billion to the PPP, was more money for CDFIs to reach minority businesses.
“The challenge is getting small business to understand that there is this program. My family had no idea what the Chamber of Commerce is or government programs. They’re just trying to survive. Ethnic media can help with that,” Lieu said. “Also contact your local member of Congress’ office. We will help them … with casework.”
Lieu said the economy must reopen but must do so with adequate testing, social distancing and contact tracing. Even then, the number of COVID cases will rise.
“When we reopen there will be additional cases. The question is: can we mitigate enough to reopen safely? It’s not sustainable to keep everyone on lockdown indefinitely,” Lieu said.