New California Poll Reveals Small Businesses’ Challenges Accessing Capital and Federal Relief Programs

(Sausalito, CA) — As the California legislature makes additional investments in state-backed small business relief, a new survey of California small businesses released today by Small Business Majority reveals that their struggles during the pandemic are being exacerbated by challenges in accessing capital. The poll also sheds new light on the systemic barriers entrepreneurs of color face when seeking financing pre-pandemic and how that has impacted their businesses throughout the crisis. 

From temporary closures to reducing their workforce, many small businesses have been pushed to the brink: 64% of California small businesses report they have been negatively affected by the pandemic, and 56% report their revenues are still down compared to last year. What’s more, the survey reveals why many small business owners may have struggled to access federal relief programs: 

• Before the pandemic, nearly 1 in 4 (23%) small businesses in California did not have a business banking relationship with a bank or credit union.
• This number rises to 28% for small business owners of color, compared to 19% of white business owners. 
• Overall, more than 4 in 10 small business owners had not obtained any capital pre-pandemic, such as loans or lines of credit, from any lending institution, or from friends or family.

Additionally, when seeking out capital, small business owners of color have encountered more setbacks than their white counterparts. While 1 in 4 small business owners overall have obtained less financing than they sought, this number is much higher among entrepreneurs of color (32%), compared to white business owners (18%). Similarly, an additional 32% of business owners of color have been denied a loan, compared to 17% of whites.

When looking at the economic downturn caused by the pandemic, less than half of California small business owners (46%) have applied for the federal Paycheck Protection Program (PPP). Of those who received a PPP loan, only 17% received the full amount requested, and the number is even lower for entrepreneurs of color: 14% versus 25% of white business owners. Additionally, more than 6 in 10 entrepreneurs of color (62%) anticipate seeking additional capital for their business, compared to 37% of white business owners. 

"As an immigrant entrepreneur, owning my own business has not been a smooth road, especially during the past year as I’ve endured temporary closures and challenges in accessing federal emergency relief,” said Sayuri Tsuchitani, owner of Headspa EN in Beverly Hills. “Receiving assistance through the California COVID-19 Grant Relief Program has helped me weather the storm right now, but my business will need long-term relief to ensure we can make it to the other side of the pandemic.”

The survey also underscores the need for comprehensive, long-term policies that will put small businesses on a road to recovery. The poll gauged small businesses’ views on policy proposals to increase the availability of capital, and the most popular idea is to increase funding to nonprofit small business lenders to allow them to make more loans to businesses that may not qualify for financing from traditional lenders. 

"This survey emphasizes the urgent need for long-term financial relief programs that will enable small businesses to rebuild stronger,” said Mark Herbert, Vice President, California at Small Business Majority. “ While California has consistently taken quick action to invest in short-term small business relief, more must be done to sustain small businesses through the difficult months ahead. This is why we’re calling on the state legislature to invest more money in the California Rebuilding Fund."

This survey, conducted by Lake Research Partners for Small Business Majority, represents the opinions of 400 small business owners in California. The sample was nearly evenly split between white entrepreneurs and small business owners of color. For a copy of the full report, please visit: https://smallbusinessmajority.org/our-research/access-capital/california-small-businesses-struggling-access-capital-need-grants-ensure-financial-recovery