California Assembly Reopening Minority Women Businesses 2021
Summary
A presentation titled Challenges in Reopening California: Minority- and Women-Owned Small Businesses, prepared for the California Assembly Select Committee on Small Business & Entrepreneurship and dated August 18, 2021. It presents figures on California small businesses, including 4,131,508 small businesses employing 7,224,945 workers, and charts of SBA 504, 7(a) and PPP lending by owner demographics. For PPP loans through July 1, 2021, it reports $103.9 billion approved for 1.1 million businesses in California. It includes charts on small business closures, revenue changes and declines in self-employment among women and minority groups. It closes with policy recommendations on mapping access to capital, refundable R&D tax credits and the Small Business Utilization program, and figures on IBank's Small Business Loan Guarantee Program.
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Challenges in Reopening California:
Minority- and Women-Owned
Small Businesses
Assembly Select Committee on Small Business & Entrepreneurship
August 18, 2021
Small Businesses in California
California Small Businesses – By the Numbers
• Civilian labor force: 18,949,731
• Number of small businesses: 4,131,508
• Small businesses with employees: 757,458
• Workers employed by small businesses: 7,224,945 (38% of all workers)
• Nonemployer small businesses: 3,374,050 (82% of all small businesses)
• 99.8 percent of all employers in the state are small businesses
• Three leading small business industries: accommodation & food services; health care & social assistance; and
professional, scientific, & technical services
• Small businesses contribute to 44% of US GDP
Source: U.S. Small Business Administration (2020); U.S. Bureau of Labor Statistics (May 2021)
California Employment by Size of Firm
17%
1-19
20-99
17%
52% 100-499
500+
14%
Source: Census Bureau - Statistics of US Businesses (2018)
SBA Loan Programs
504 Loans
Percentage of SBA 504 Loans to Minority
Owners by $ Value - National
California 2019 2020 2021* 17%
2%
Asian or Pacific
Gross Approval Black
$1.2 billion $1.4 billion $1.4 billion 10%
Amount Hispanic
Other Minority
Percent of National 24.1% 24.0% 24.2% 71% Non-Minority
*Through March 9, 2021
Source: U.S. Small Business Administration (2021)
7a Loans
Percentage of SBA 504 Loans to Minority
Owners by $ Value - National
California 2019 2020 2021* 27% Asian or Pacific
Black
Gross Approval Hispanic
$3.5 billion $3.7 billion $3.2 billion
Amount Other Minority
60% 4%
8% Non-Minority
Percent of National 15.0% 16.1% 16.3%
1%
*Through March 9, 2021
Source: U.S. Small Business Administration (2021)
PPP Loans Per Capita by $ Value
PPP Loans in California
Loans through July 1, 2021
Jobs Supported 8.4 million
Gross Approval Amount $103.9 billion
Percent of National 13.4%
Number of Businesses Awarded 1.1 million
Percentage of PPP Loans to Minority Owners by
$ Value - California
Asian or Pacific
21%
Black or African American
5% Hispanic
56%
17% Other Minority
Non-Minority PPP Loans per Capita ($)
1% (2,655, 5,520]
(1,870, 2,655]
(1,201, 1,870]
(265, 1201]
Source: U.S. Small Business Administration (2021); California Department of Finance population estimates (2021)
The Impact of COVID-19 on California’s Small Businesses
Share of Small Business Closures from January 2020 to
March 2021
% of Small Businesses Still Shut
State State Rank
Down Since January 2020
Michigan 39.7% 1
Massachusetts 39.1% 2
Alaska 38.9% 3
35.9% Maine
Colorado
38.9%
38.8%
3
5
Connecticut 38.5% 6
Small business closures New Jersey 36.9% 7
in California between Rhode Island 36.5% 8
Illinois 36.5% 8
January 2020 and March New Mexico 36.2% 10
2021 California 35.9% 11
New York 35.4% 12
Louisiana 33.2% 13
Texas 32.6% 14
Georgia 32.3% 15
Source: Opportunity Insights (2021)
Percent Change in Small Business Revenue between January
2020 to March-May Avg. 2021 COVID’s Impact on Small
Business Revenue
Small Business Revenue Change from January
2020, California
10%
0%
-10%
-20%
-30%
-40%
-50%
-60%
Source: Opportunity Insights using Womply data (2021)
Places with large declines in self-employed business owners
have relatively large shares of minority populations
Est. Change in Share of Share of
Metropolitan Area Self-Employed Population Population
Businesses* Asian Black
Los Angeles-Long Beach-Anaheim, CA -23% 18% 7%
New York-Northern New Jersey-Long Island, NY/NJ/PA -44% 16% 14%
Philadelphia-Camden-Wilmington, PA/NJ/DE -29% 6% 21%
San Francisco-Oakland-Fremont, CA -46% 23% 16%
Washington, DC/MD/VA -23% 12% 15%
*Note: Change from April 2019 to April 2020
Source: U.S. Small Business Administration Office of Advocacy (2021)
Women and minorities experienced higher declines in self-
employment between April 2019 and April 2020
Estimated Change in Total Working Self-Employed (April 2019-April 2020) National
Everyone -20%
Asian -37%
Black -38%
White -17%
All other groups -19%
Hispanic -26%
Non-hispanic -19%
Men -19%
Women -22%
-40% -35% -30% -25% -20% -15% -10% -5% 0%
Source: U.S. Small Business Administration Office of Advocacy (2021)
Industries with a larger share of small business employment and
minority workers experienced greater declines in employment
Share of Small Business
Employment by Industry*, Share of Minorities by Industry, Percent Change in Employment by
California California Industry from January 2020,
California
90% 10%
Leisure & Leisure & Hospitality 0%
Hospitality -10%
-20%
89% Professional & Business Services -30%
Retail & -40%
-50%
Transportation
Education & Health Services -60%
81%
Professional &
Retail & Transportation
Business Services
Retail & Transportation
0% 10% 20% 30% 40% 50% 60% 70% Professional & Business Services
67% Minority Non-Hispanic White
Education & Health Services
Education & Leisure & Hospitality
Hospitality
*Note: A small business is defined here as
having less than 500 employees
Source: Census Bureau - County Business Patterns (2019); American Community Survey Public Use Microdata Sample (2019); Opportunity Insights (2021)
Policy Recommendations
Map access to capital for small businesses
• Collect data, organize a publicly accessible database, and maintain a website; may either be done
through state government agency or independent third party
• Map numbers and locations of small businesses seeking capital, and the presence of capital
allocators (banks, CDFIs, MDIs, other financial institutions, and technical assistance providers)
• Ensure that on-the-ground mapping is comprehensive and inclusionary, with a focus on minority-
owned and women-owned small businesses
Provide refundable R&D tax credits for small businesses and
startups
• Some small businesses cannot utilize existing R&D tax credits because they face little to no tax
burden (particularly startups at the pre-revenue stage)
• Targeted policies to refund a percentage of unused research credits could facilitate greater
investment by these firms in activities with the potential to generate future revenues
Enhance the Small Business Utilization program
• Elevate the Small Business Liaison role in each state agency from partial duties to full time equivalent at the senior
management level with direct reporting responsibilities to the cabinet level Administrator to provide strong and
accountable advocacy for small businesses
• Provide, centralize, and fund enhanced TA support for small business owners and entrepreneurs
• Capital coordination: increasing the flow of communication in SME financing could potentially enhance the deployment of capital. Work
to identify several "low tech" solutions that involve supporting the efforts of financial intermediaries, entrepreneurs and economic
development organizations to coordinate more effectively. Such collaborative approaches have long been successful among financial
institutions in cooperative syndicates for large transactions
• Risk mitigation: Credit enhancements such as guaranty programs from the state Treasury office, California Capital Access Program
(CalCAP) and the Infrastructure and Economic Development Bank or IBank (i.e., the Small Business Loan Guarantee Program) can
provide sustainable support. One issue is these government programs’ small staffs, which limits outreach and capabilities. By deploying
more robust TA and establishing enhanced referral networks, big banks can channel small business loans they cannot finance to
community lenders who can
The Impact of IBank’s Small Business Loan Guarantee Program
Jobs created or retained 384,000
Value of capital injected into the state’s small business community FY20 $509.6 million
Number of loans guaranteed since early 2000s 20,000
Source: I-Bank California Infrastructure and Economic Development Bank
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