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Coronavirus threatens health of Atlanta's black-owned businesses
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Alphonzo Cross owns the Parlor in Castleberry Hill.
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By
Crystal Edmonson – Broadcast Editor
Apr 20, 2020, 6:38am EDT
On a typical Friday evening, the
Parlor in
Castleberry Hill would be full of fashionable 40-somethings lounging in cozy, brightly colored chairs, enjoying a cocktail, conversation and down-tempo house music.
“I wanted to create a safe space where grown-ups could sit down and vibe and hear each other speak,” said Parlor owner Alphonzo Cross.
He launched the lounge in 2018. As recently as last month, the Parlor was ready to expand.
“We were getting ready to launch our social club where people could pay a membership and enjoy the space during the day and launch a food program. We were getting ready to grow,” he said.
And then it happened. The global coronavirus pandemic reached Georgia.
The City of Atlanta issued an executive order on March 19 to close all bars and nightclubs. That included the Parlor.
“We closed like everybody else,” Cross said.
Cross is CEO of Quintessential Brands. He operates the Parlor as a subsidiary. The Atlanta-based company is one of about 6,000 black-owned businesses in the metro area, according to the U.S. Census Bureau.
COVID-19 has hit the African-American community hard. As of April 17, Georgia had 17,194 confirmed cases of coronavirus. The racial breakdown shows 26% of people infected were black and 19% were white, according to the
Georgia Department of Public Health. African Americans make up nearly a third of Georgia’s population. While white residents account for 60%.
The economic impact of COVID-19 is threatening the health of African-American small businesses in a similar fashion.
“Even before COVID-19, the disparity was sweeping,” said
Jay Bailey, president and CEO of the
Russell Center for Innovation and Entrepreneurship (RCIE).
During a telephone interview, he recited a series of stark statistics, including how the average white-owned business in metro Atlanta is 11 times larger than the average black-owned business, according to research from the Washington, DC-based nonprofit
Prosperity Now.
“You know it used to be [said] when the world gets a cold, the black community gets pneumonia. Well, the black community is getting COVID-19 in comparison now,” Bailey said.
Prior to the rise of the global pandemic, the RCIE was seeing between 800 and 1,500 people attend its workshops and classes. It also provided co-working space for small businesses at its office in the Castleberry Hill community west of downtown. Because of social distancing, the workshops are now being offered online and Bailey said his team has become a triage.
“I’m excited about what we’re able to do now, leverage the relationships we have with banking institutions, with the SBA, with law firms, with accountants to be able to cross connect these services that businesses normally wouldn’t have access to," Bailey said.
The RCIE has also applied for coronavirus relief funds under the
Paycheck Protection Program (PPP). Bailey said the organization must retain its staff because its services are needed now more than ever.
The government launched the PPP on April 3. Within two weeks, banks had
loaned all of the funds allotted to $349 billion program.
“It has been a bit emotionally exhausting,” said
Lakeysha Hallmon, founder and CEO of
The Village Market. “Businesses are so disappointed with where they are and where they wish they were so that they could get some of these funds deployed to them.”
RELATED: 'On the Edge': Atlanta small business owners navigate COVID-19
The Village Market provides small business development services. Instead of teaching in-person classes, Hallmon said she has been counseling an average of 40 businesses a week, on the telephone and via email. A lot of the inquiries she received pertained to coronavirus relief funds.
Initially the PPP did not provide money to sole proprietors, a structure where the business owner and the company are one. Small business owners pushed back on the policy.
“They argued that I don’t have to have an S-corporation or a C-corporation or an even a LLC [Limited Liability Corporation], that the IRS already recognizes me as a sole proprietor through the tax system, and they were correct,” said Ed Carballo, deputy district director for the
U.S. Small Business Administration for the state of Georgia. “So as of last Friday, all of those folks were eligible to apply for the PPP on their own.”
The policy change happened a week after banks initially started lending the coronavirus aid. Small business owners had already applied. Some of their applications were denied.
“Black businesses were cancelled out from the beginning,” Hallmon said.
Most (96%) of black-owned businesses in metro Atlanta are sole proprietors, according to Prosperity Now.
“Businesses are forced into these spaces because black businesses and women-led businesses, the disproportionate numbers for how we get funding opportunities from banks and credit unions are astronomical, we don’t get to play in that same field," Hallmon said. "So fast forward. COVID has happened, and businesses are being disqualified, but they never got an opportunity to ever qualify because they didn’t get money to start their business before COVID.”
The Village Market is also a small business, but Hallmon said she saw this coming. When she started the organization in 2016, she had a full-time job and saved the money the Village Market would have paid for her salary. That savings coupled with grants the Village Market received earlier this year leaves it well-capitalized to operate. But the organization is seeking additional grants to make sure it can serve its small business clients.
The demand for capital is high. When the
Atlanta Wealth Building Initiative announced its COVID-19 small business relief fund March 16, it had requests for $1.5 million within 48 hours.
“We’re funded at $500,000 that we will be distributing to small businesses and non-profit organizations. The bulk of it will go to small business owners,” said Letresa McLawhorn Ryan, executive director of the Atlanta Wealth Building Initiative (AWBI), an organization that aims to close the area’s wealth gap. Metro Atlanta has one of the nation’s highest rates of income inequality.
“We know that liquidity is going to be incredibly important, so there is going to need to be a focus on recapitalizing funds that have already been established,” Ryan said. “There’s going to be a need for technical assistance, making sure people are informed about what resources are available. And crisis strategy is another piece that’s going to need to be implemented now to help businesses survive.”
AWBI also supports efforts to encourage state and federal officials to push for another Coronavirus Aid, Relief and Economic Security
(CARES) Act legislation that would specifically target community-based small businesses. The first CARES Act, a $2 trillion measure, provided aid to individuals, state/local governments and small businesses with fewer than 500 employees. Ryan said that covers a large swath of companies, many of which do not reflect most of the small businesses around metro Atlanta.
"Small businesses just aren't protected," said Alphonzo Cross who owns the Parlor lounge in Castleberry Hill. "They're very vulnerable to the whims of the marketplace." He was planning to apply for the PPP loans before finding out the money was no longer available. But Cross said even before then, he spoke with a friend who owns a restaurant and heard the process of applying for the relief funds required near-perfect financial records, and advice from a lawyer and an accountant.
"If you're a small business or you're not very well-capitalized, no one has money to hire a lawyer and an accountant," he said. "This virus and what's happening right now is shining a brighter light on what's already wrong with regards to the difference between the haves and the have nots, and unfortunately, people of color are more in the category of the have nots."
Cross is in a better position than some. He owns the building in which his company operates. While his lounge is closed, he said he still plans to launch other hospitality concepts under his umbrella company, Quintessential Brands. But he said he hopes the environment is different than it was prior to the pandemic.
“I think this really needs to kick the City of Atlanta into high gear with regards to how it is looking at its small business population,” Cross said, especially those he calls "community catalysts," those entrepreneurs who operate coffee shops, restaurants and other businesses that open in under-served, inner-city neighborhoods.
Ideally, he would like to see the city establish a fund “no less than $5 million that would grow every year,” Cross said. The money would be used to purchase buildings, technology, whatever the business needs to get started, without amassing significant debt.
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