(Reuters) - 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, according to the report.
“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% of small businesses owned by people in that older group closed down at the height of the crisis last spring, compared to 20% of small businesses overall.
Small business ownership for people under the age of 45 rebounded more quickly and was down 2% overall as of January. But for people 45 and older, it was still down by 9%.
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% 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% and those owned by older Hispanics at 81%. That compared to 77% of businesses owned by older whites and 78% of businesses overall in that age group.
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% in January 2021 when compared to a year earlier. It was down 16% for Blacks in that age group and 11% lower for Hispanics.
Most older small business owners sought relief through the U.S. government’s Paycheck Protection Program, which offered forgivable loans to that group, but minority-owned businesses had less success securing needed funding.
Some 81% of small firms owned by whites aged 45 and older received the full amount requested. But that dropped to 71% for those owned by Asians in the same age group, 63% for those owned by Hispanics and 46% 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% of Black-owned small businesses were financially “distressed” as of 2019, along with 16% of those owned by Hispanics and 9% of those owned by Asians.
“People of color 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 nonprofit organization that provides programs, information and services for Americans over the age of 50.
Reporting by Jonnelle Marte; Editing by Paul Simao
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