Government Shutdown Could Cost Black And Minority Businesses $450M
Black and other minority-owned businesses are being severely affected by the federal government shutdown. A recent survey conducted by the National Minority Supplier Development Council (NMSDC) reveals that these firms are being adversely affected by the economic downturn caused by the shutdown.
The closure, which began on October 1, is expected to be one of the longest in US history. Additionally, new analysis by Creative Investment Research estimates that the shutdown could result in losses ranging from $400 million to $450 million for minority business enterprises (MBEs).
Black businesses affected by federal government shutdown
The total estimated loss includes $150 million from contract and payment delays, $125 million due to decreased demand for goods and services, $75 million resulting from staffing cuts and layoffs, and $50 million attributed to higher short-term borrowing costs for these businesses.
“The numbers tell a painful truth. Within our network of 15,000 minority-owned businesses, more than a third are being directly hit by this shutdown,” Don Cravins, interim president and CEO of NMSDC, said in an email to Black Enterprise.
He continued: “In just three weeks, these firms have lost nearly a quarter of their revenue–translating into hundreds of millions in economic losses. Behind every data point are real entrepreneurs, real employees, and real families. We can’t afford to treat minority-owned or small businesses as afterthoughts–they are essential to America’s strength and recovery.”
Black Businesses facing struggles
The federal shutdown comes at a time when Black businesses are struggling to keep their businesses amid DEI rollbacks. Nearly 2 in 5 (39%) of Black founders were denied when applying for loans, lines of credit, or merchant cash advances, according to a recent analysis by LendingTree.
Additionally, new research from Cornell University found that the temporary surge in funding for Black startup founders after George Floyd’s murder was driven largely by investors who had never previously backed a Black entrepreneur, and funding retuned to prior levels within just two years.
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