A recent survey shows that many small businesses in Massachusetts are still making less profit than before the pandemic. And companies owned by people of color are more likely to report difficult business conditions.
MassINC Polling Group conducted the poll for the Coalition for an Equitable Economy and Mass Growth Capital Corporation. Between June and August, the group contacted 3,243 businesses in Massachusetts that employ fewer than 500 people. Just over half of companies — 53% — reported that they were making less revenue than before the pandemic. About 26% reported making more money than before the pandemic.
Steve Kochela, president of MassINC, said one of the reasons many businesses have yet to fully recover from the start of the pandemic is simply a drop in footfall at places like restaurants, bars and dry cleaners.
Another, he says, is lack of access to affordable capital. Many business owners have not been able to make the necessary investments over the past few years, especially entrepreneurs of color. Kotsela said they are more likely than white entrepreneurs to report being turned down by banks when they apply for business loans.
“Those same entrepreneurs of color are more likely to say, ‘If I had the funds that I’m looking for, I’d do things like expand, I’d hire, I’d buy new equipment,'” Kotsela said. “They are more likely to seek capital to do these kinds of expansion projects than a white-owned business.”
The survey also found that people of color are less likely to sell their businesses or retire from management positions. Kotsela said that’s a sign that small business owners are likely to become more racially diverse.
“This is just the way things are going,” he said. “But there are barriers to really achieving that in the strongest possible way,” and the biggest one may be access to capital.
The survey found that 15% of companies reported receiving some form of technical assistance or coaching in the past year. More black, Hispanic, female and LGBT business owners said they sought help with tasks such as applying for grants or learning how to use new technology. However, almost half of all small business owners said they lacked information about this type of assistance.
One resource available is the Massachusetts Small Business Development Center Network, which provides free assistance to small business owners looking to expand or improve their businesses. The program is primarily funded by the federal and state governments.
Cliff Robbins, the network’s senior business advisor, said more small business owners have been reaching out for help since the pandemic began. His team worked around the clock helping businesses apply for federal grants in the midst of COVID. The group is now focused on helping business owners navigate a rapidly changing economy—one that relies more on technology and is characterized by fierce competition for talent. But according to Robbins, the biggest challenge facing small business owners right now is inflation.
“They’re caught between a rock and a hard place,” Robbins said. “They have to raise prices. At the same time, they don’t want to lose customers.”
According to a MassINC survey, 74% of small business owners said their biggest concern is rising costs due to inflation.
The Federal Reserve raised interest rates again this week as part of a strategy to combat rising prices. But higher interest rates will also make it more expensive for businesses to borrow money.
Renewal: This post has been updated with a new graphic from MassINC Polling Group showing that 60% of all survey respondents, 85% of black small business owners and 88% of Hispanics expressed concerns about access to capital.