How can the racial gap in small business recovery be closed? And whose responsibility is it? Following Hurricane Harvey, the first and most important task was assisting displaced individuals, but with widespread business closures, our attention extended to the Houston business community. Restaurant and retail chains receive aid from large corporations following a disaster — but who assists small businesses, and more specifically, black-owned businesses?
According to FEMA, 40 percent of small businesses do not recover after a flood-related disaster. The impact on black-owned business is far worse. The 2011 PERC Results and Solution Report examined small businesses for five years following Hurricane Katrina. The report notes that black-owned businesses faced greater difficulty receiving recovery-related aid and when compared to other ethnic groups the permanent closure rate was highest for black business owners.
Days after Harvey, with damages reaching an estimated $180 billion, the Greater Houston Black Chamber of Commerce Foundation developed a small business grant for Houston black-owned businesses harmed by the hurricane. Among the nearly 60 applicants, the collective total loss was over $170,000, with 70 percent of the applicants indicating they were not members of the chamber.
The sustainability of the black business community is often dependent on black social networks. In a 1987 study, sociologist Alejandro Portes examined Cuban business communities in Miami and found ethnic institutions — specifically ethnic chambers of commerce — were an important social network tool used to gain business resources. African-American entrepreneurs tap industry-specific social networks such as a Realtor association or ethnic organizations like black chambers of commerce, fraternities, sororities, historically black colleges and universities and social groups such as the NAACP or National Urban League. Additionally, this includes organizations that are both racially-specific and industry-specific (e.g. National Association of Black Accountants).
So why does it take a disaster for many black business owners to connect to black social networks? Interestingly, many African-American entrepreneurs and small-business owners do not want to be associated with the "black-owned" title. My current research analyzes the strategies African-American entrepreneurs use to emphasize or de-emphasize their black-ownership status. The desire to de-emphasize being black-owned may be due to the knowledge of racial stigmas, consumer discrimination, banking discrimination or placement in industries dominated by non-blacks.
For example, one entrepreneur from Houston told me: "I know automatically that black folks necessarily will not support my business, and this is a retail technology business, so it doesn’t really appeal to just the African-American community — it appeals to everyone. But I think that with them just seeing that I’m black, it's, 'Oh that’s a black female.'"
In my study, participants were asked to disclose their affiliations. The African-American entrepreneurs in industries dominated by non-blacks tended to list industry-specific organizations (e.g., Houston Area Realtors or National Society of Accountants). However, when questioned about gaining customers, marketing and funding opportunities, many of the participants unconsciously revealed answers that illustrate their dependency on black organizations.
One participant resented the “black-owned” label, but after having loan applications rejected by multiple banks, she entered a competition hosted by a black organization for black entrepreneurs and received funding. Additionally, participants in organizations with a lack of black membership had a difficult time gaining resources — specifically clients and support.
One participant described: "He sits on the board ... and he’s the only black. And after two years — two years — he ain’t got a single deal. You mean to tell me after two years and you’re the only one in the real estate industry on that board, not one referral? I know someone has bought a home in those two years or knows somebody that is looking for a home."
The Greater Houston Black Chamber of Commerce was one of many black organizations in Houston to aid in Hurricane Harvey recovery. Nearly 350 businesses subscribed to the GHBC Disaster Recovery Vendor list to offer discounted and in-kind services to impacted businesses.
With the knowledge that black-owned businesses are less likely to reopen following a disaster, business owners must be mindful that emphasizing their black-owned title through affiliation with black organizations – though it may come with stigmas and stereotypes – brings with it a network of fellow black businesses and organizations invested in not only the development but the sustainability of the black business community.