The Restaurant Revitalization Fund prioritized funding for socioeconomically disadvantaged businesses. So why did Dayton's minority-owned businesses receive such a small percentage of local funds? (Photo: "Thank you essential workers!" by spurekar is licensed under CC BY 2.0)
LISTEN TO ARTICLE HERE: Restaurant grant data for Dayton reveals racial funding gaps
An Elevate Dayton analysis of federal data reveals that minority-owned businesses in Dayton fared worse than others.
By Stephen Starr and Linda Miller, Elevate Dayton
The Restaurant Revitalization Fund (RRF) distributed $28.6 billion in federal aid to more than 100,000 restaurants, bars, taverns, bakeries, food truck companies and others to cover costs, including outdoor seating, staff salaries and debt.
The program was designed to be more equitable than the more ubiquitous Paycheck Protection Program. As such, RRF data, which is publicly available on the U.S. Small Business Administration’s website, provides a rare glimpse into how one industry has been impacted by the pandemic and whether the very businesses most at risk, in some cases due to decades of discriminatory policies and practices, are getting the help they need.
Despite legal challenges by a handful of White business owners, the RRF program largely succeeded in prioritizing funding for minority-, veteran- and women-owned businesses. Of the $28.6 billion awarded nationally, SBA distributed approximately $18 billion or 63% to small businesses that fell into one or more priority group, including $7.5 billion to women-owned businesses, $1 billion to veteran-owned businesses, $6.7 billion to socially and/or economically disadvantaged-owned businesses, and $2.8 billion to businesses owned by representatives of multiple priority groups, Laura Schafsnitz, spokesperson for the SBA, told Elevate Dayton. In terms of the percentage of funds provided to priority businesses, almost 44% went to businesses owned by women, nearly 6% of funds went to businesses owned by veterans, and 34% of the grants were distributed to businesses owned by socioeconomically disadvantaged persons. According to the SBA, groups that presumptively qualified as socially disadvantaged include “Black Americans,” “Hispanic Americans,” “Asian Pacific Americans,” “Native Americans,” and “Subcontinent Asian Americans.”
On the surface, the picture looks even better for similarly situated Dayton-area food businesses. According to Elevate Dayton’s analysis of SBA data, the 90 businesses that listed Dayton as their primary location received $15.7 million in RRF support last year.
Business owners who fell into one or more priority groups accounted for 81% of all Dayton RRF recipients and received 72% of Dayton-specific funding. In addition, 63% of funds went to businesses in low- to moderate-income areas or LMIs.
But a deeper look into the distribution of those funds raises some troubling questions about racial equity in Dayton’s business ecosystem.
Our analysis showed that while Dayton veteran- and women-owned businesses fared equal to or better than their counterparts across the country, the same is not true for local minority-owned businesses.
—Despite comprising 26% of all Dayton grant recipients, local disadvantaged/minority-owned businesses received only 13% of the local grant revenue. By contrast, women-owned businesses in Dayton made up 50% of grant recipients and received 55% of all local funding. Veteran-owned businesses in Dayton received 4% of the funding compared to nearly 6% nationally.
—Disadvantaged/minority businesses in Cleveland, Columbus and across the state also received proportionally less money when compared to overall percentage of recipients, but the disparity was not as stark as it was in Dayton.
In Cleveland, minority-owned businesses comprised 31% of grant recipients and collected 21% of the funding. In Columbus, they made up 32% of businesses and got 23% of the funding. And across Ohio, disadvantaged/minority-owned businesses comprised 25% of local recipients and received 20% of the funding.
—When compared to disadvantaged businesses nationally, Dayton fared even worse. Nationally, disadvantaged businesses made up 34% of all recipients and received 32% of total funding.
—The reverse is true for recipients that did not qualify as a women-owned, veteran-owned or socioeconomically disadvantaged business. Nationally, they comprised just 28 percent of all recipients yet received 37% of all funding.
Grant awards were based on the losses that applicants incurred during the pandemic. For instance, applicants in operation prior to or on January 1, 2019, received the equivalent of their 2019 gross receipts minus 2020 gross receipts minus PPP loan amounts and other small business grants—up to $5 million. Businesses with more than one location could receive up to $10 million.
Throughout the business-building process, minority business owners face economic, market, sociocultural, and institutional barriers, and they have suffered disproportionately during COVID. As a result, they likely are smaller and generate less revenue than White-owned businesses that do not experience the same barriers, such as access to capital, limiting how much money in RRF grants they could receive.
Because the SBA only released data about businesses that received funding, there are a number of questions we cannot answer: How many companies that could be deemed socially or economically disadvantaged applied and failed to receive funding? How many Dayton-area companies had their promise of funding revoked after legal challenges caused the SBA to stop prioritizing women-, minority- and veteran-owned businesses , as has happened elsewhere around the country? How many businesses in the Dayton area never heard about the RRF, or heard about it too late to apply? And we can’t say, definitively, why minority-owned restaurants received proportionately less money than other businesses.
We reached out to the SBA in hopes that they could help explain the funding gaps we identified. We have not received a reply but will update this story if and when we do.
SBA acknowledges funding gaps
The fact that minority-owned businesses made up 26% of all Dayton recipients yet received only 13% of the revenue is both a reflection and a symptom of the chronic underinvestment in Black-owned and other minority businesses.
The SBA acknowledged as much, noting the agency is “acutely aware of gaps that persist for certain communities in accessing capital.”
“While progress has been made, our data also tells a deeper story: historic inequities in accessing capital persist, and we must do more to lower the barriers of entry to opportunity for all our entrepreneurs."—SBA Administrator Isabel Guzman
Over the past five years, loans issued to the smallest borrowers through the SBA-backed 7(a) loan, Express, and Community Advantage decreased by over 45%. And, according to the SBA, Federal Deposit Insurance Corporation (FDIC) data on commercial small business lending by regulated banks shows an overall 3% decline (translating to over 600,000 loans) in the proportion of loans under $100,000.
The reluctance of lenders to make small-dollar loans has led to disproportionate impacts on minority business owners. According to the SBA, firms with non-Hispanic Black ownership and firms with $100,000 or less in revenues were only half as likely as firms with non-Hispanic white ownership to obtain bank funds (23%, 24%), and Latino-owned firms were similarly lower (34%).
“In the midst of a once-in-a-generation pandemic, the SBA’s mission-driven team delivered a record number of SBA’s traditional loans to our nation’s small businesses – in addition to more than $1.1 trillion in COVID-related relief since the start of the pandemic,” said SBA Administrator Isabel Guzman in a Nov. 21 statement.
“While progress has been made, our data also tells a deeper story: historic inequities in accessing capital persist, and we must do more to lower the barriers of entry to opportunity for all our entrepreneurs. We will continue to build on our impactful programs to meet small businesses where they are and connect them with the resources needed to thrive.”
To ensure that the smallest businesses and those in underserved communities received RRF funding awards, the SBA set aside specific amounts of money for applicants with 2019 gross receipts of $1.5 million or less, including $500 million for applicants whose businesses generated $50,000 or less in 2019.
In addition, the agency reserved the first three weeks of the application period for businesses that were at least 51 percent owned by individuals who are women, veterans and/or socially or economically disadvantaged individuals, which is defined as business owners “whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business who are not socially disadvantaged.”
Although the SBA did not require applicants to disclose their race or gender, they did have to self-certify that they were a member of a priority group. Therefore, the publicly available data offers an equity lens for viewing who did—and didn’t—receive funding, and in doing so, helps the public hold the government accountable for those decisions.
Digging deeper into the data
Elevate Dayton took the entire database of RRF recipients and isolated those businesses that listed Dayton as its primary location. This included 90 businesses in 26 zip codes. Because we searched only for those businesses that listed Dayton as the location, our analysis does not include businesses in surrounding communities such as Centerville, Washington Township and Yellow Springs.
Of the 90 businesses we did analyze, 45, or 50% are woman-owned; six (7%) are veteran-owned, and 23 (26%) qualified as socially or economically disadvantaged. They included restaurants (44), bars/saloons/lounges (20), and a mix of distilleries, bakeries, food trucks, caterers or eateries categorized as “other.”
Individual funding amounts, we found, ranged from under $3,000 to over $1 million.
In the 45417 zip area, a region of about 30,000 people that encompasses most of West Dayton and parts of Trotwood—notoriously underserved districts—just one business, a bar, received RRF support. According to the website City Data, nearly 80 percent of residents in the 45417 zip code are African American.
In Dayton’s inner east district that encompasses the zip area 45403 and is home to around 15,000 people where income and property values are well below the national average, a single restaurant received an RRF grant.
Moreover, of the 23 recipients that qualified as “socially and/or economically disadvantaged,” just six were women-owned.
Why we are supplying this information
During the course of reporting for the COVID Can’t Stop Us series, we have regularly run into roadblocks when looking for data that can help explain how area women-, minority- and veteran-owned businesses are faring during the pandemic. This is especially true of local data.
We have yet to find any local government agency or business advocacy organization that collects and makes public such data. The office of the Ohio Secretary of State, for example, allows new business proprietors to choose whether or not to include details like gender, race and ethnicity on new business applications, and as such, any data it gleans from new business owners is incomplete at best.
Similarly, organizations such as the Dayton Chamber of Commerce, Montgomery County and others often don’t track business owners’ gender and race.
While accessing datasets from federal agencies can often be difficult or only achieved through Freedom of Information Act (FOIA) requests, the information gathered by the SBA from applicants of the Restaurant Revitalization Fund is a good example of both the benefits and challenges of targeting programs to underserved individuals and historically marginalized groups.
On the one hand, the government has a role in remedying past societal discrimination, as it tried to do by prioritizing funding for women, veterans and people who historically have been socially and culturally disadvantaged, like minority business owners. On the other hand, the Equal Protection Clause of the 14th Amendment makes it difficult for the government to design programs with race- or gender-based criteria. The Supreme Court has held that remedial policies sometimes justify the use of preferential treatment based on race and gender, but only under very limited circumstances. For example, the policy must target a specific episode of discrimination and there must be prior discrimination by the government unit involed. It’s not enough to demonstrate a broad pattern of bias.
This kind of “strict scrutiny” complicates the efforts of governments to provide targeted relief to individuals who are most disadvantaged, as it did in the case of the RRF program. But the government could do more to collect data on who is and isn’t being helped.
Having access to demographic data about business owners doesn’t just benefit journalists or the public. It is essential to our understanding of what interventions are most effective, and what else is needed to help the area’s most vulnerable businesses to thrive.
As Matt Shimp, manager of research and analytics for the Dayton Development Coalition, told us: “If we were aware of trends in the creation and sustainment of minority-, woman-, or veteran-owned businesses, we could be more proactive about reaching out to businesses that may need resources.”
If you want to dive into the data yourself, you can access our spreadsheets here.