Youssef Mubarez stopped by to check in on a few bodegas on Monday, in New York City. They were selling and serving food, and had toilet paper and cleaning supplies available. Mubarez is director of public relations for the Yemeni American Merchants Association, which claims to have 3,000 member businesses in New York — a majority of which are bodegas, according to Mubarez.
“Many of these bodegas are in areas considered food deserts and will definitely serve as important sources of supplies during this [COVID-19 health] crisis,” Mubarez says, via email. “My local bodega owner even offered to save me a bottle of hand sanitizer from his shipment tomorrow. That’s the kind of thing they do for their community.”
The USDA defines “food deserts” as areas with a poverty rate of 20 percent or greater, or a median family income at or below 80 percent of the statewide or metropolitan area median family income, where at least 500 people and/or at least 33 percent of the population lives more than 1 mile from a supermarket or large grocery store (10 miles, in the case of rural census tracts). In New York City, where most households don’t own a car, the “food desert” radius can be even smaller, practically speaking. In some neighborhoods of New York City, bodegas represent 80 percent of food sources.
Locally owned, and with fewer than five employees, microbusinesses like bodegas, corner stores, street vendors and takeout spots are essential for any neighborhood, but especially in food deserts. A new report from the Association for Enterprise Opportunity puts a spotlight on the role of microbusinesses in the U.S. food system. CEO Connie Evans and her staff want to elevate these businesses as part of the solution to food insecurity in the short term, during the novel coronavirus pandemic, as well as in the long term.
“Food businesses are not immune to the challenges that will come about because of COVID-19,” Evans says. “Having said that, I think this is another opportunity where we can see, by having local businesses in the community, that there is an opportunity for these businesses to rally and be a point of connection for people at the local level to get their food and other supplies.”
Parsing through U.S. Census Data, the report identifies 327,000 microbusinesses in the U.S. food system, including retailers, manufacturers, distributors, processors, producers, waste management companies and support service providers. Together, these businesses employ 1.9 million people, who collectively earn $17.7 billion in annual wages from those businesses.
Founded in 1991, the Association for Enterprise Opportunity and its 1,700 members across the country are all about trying to level the playing field for microbusinesses, particularly when it comes to the ways that public dollars get spent to subsidize some food businesses versus others.
“There’s a lot of money put towards the larger grocery stores, making healthy food available, and we’re not saying no to those strategies,” says Hyacinth Vassell, who led the report team as vice president for innovation engineering at AEO. “But there are microbusinesses that are local and understand the cultural needs of these communities but are not a part of that conversation.”
According to Evans, that applies to the current crisis response conversation. While there might be as much as $50 billion in U.S. Small Business Administration Economic Injury Disaster Loans going out over the next few months, Evans is not expecting many of those dollars to reach microbusinesses. Nor is Evans expecting much help for microbusinesses during the COVID-19 crisis from the SBA’s largest program, the 7(a) loan guarantee program. That’s in part because of the program’s paperwork requirements, which can be impossible for the smallest businesses to meet, and in part because the program has historically relied on mainstream financial institutions who aren’t interested in the smaller loan amounts that microbusinesses need and therefore haven’t invested in cultivating and maintaining relationships with them.
Evans points to the SBA’s Microloan Program, a much smaller program, as a key resource that does reach microbusinesses that need support in these uncertain times.
“SBA has pledged funding to 7(a) and to disaster loans, but they haven’t yet allocated additional funds to the microloan program, and we know the microloan program has a very good record of reaching into lower income communities and having a higher percentage of black and brown borrowers than the 7(a) program,” Evans says.
First implemented in 1992, the SBA Microloan Program lends capital at discounted rates to a limited set of intermediary organizations across the country, who use that capital to make loans up to $50,000 to small businesses and nonprofit child-care centers. For fiscal year 2019, the microloan program supported 5,532 loans to small businesses and nonprofit child care centers, totaling $81.5 million, for an average loan size of $14,735, with an average interest rate of 7.5 percent.
By contrast, just eight percent of 7(a) program loans in fiscal year 2019 were for less than $150,000 (although those loans totaled $1.6 billion). In the same fiscal year, only three percent of 7(a) program loans went to black business owners, and only 6 percent to Hispanic business owners.
“I’m not by any means saying 7(a) and disaster loans shouldn’t have increases,” Evans says. “I just think we should also look at increases in the microloan program, because it does tend to reach businesses of a smaller size who are going to face real critical needs at this time.”
In New York, the Yemeni American Merchants Association is still recommending to its members that they apply for SBA disaster loans to deal with cash flow issues during the COVID-19 crisis. The group is also joining a chorus of voices calling on federal, state and local governments to defer payments for business income tax, property tax, payroll tax, water and sewage charges, workers’ compensation and disability insurance.
“On top of that, we are trying to work individually with owners to reach out to their landlords and insurance companies to alleviate the pressure of [rent and premium] payments,” Mubarez says.
Beyond the immediate crisis, the Association for Enterprise Opportunity also puts forth broader policy recommendations in its report that would support microbusinesses — including policies that legalize street vending, tax credits and grant programs to stimulate investment in microbusinesses, and set-asides for catering microbusinesses to supply cafeterias at schools, hospitals and other anchor institutions. The report also calls for zoning changes to support more urban agriculture.
The report also highlights initiatives that are already in place to support microbusinesses to provide more access to healthy foods. “That’s where people go to shop, why not meet them where they are,” Vassell says.
The DC Central Kitchen Healthy Corners program, highlighted in the report, uses its buying power and food storage infrastructure as a large commercial kitchen to act as wholesaler of fresh fruits, vegetables, and healthy snacks to bodegas and corner stores in the Washington, D.C.-area. In 2017, 71 participating locations sold 251,000 healthy items supplied through the program.
“We’re not saying anything against larger grocery stores,” Vassell says. “We’re saying that even though there are strategies out there right now supporting them, there’s still a problem that exists. There’s still one in eight Americans, that’s 40 million people, who are food insecure, and that was before this crisis. We’re saying allow the micro-entrepreneurs to be part of the conversation and give them the support, the capital, the technical assistance, to thrive.”
This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi.
Oscar is Next City's senior economics correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha, and Fast Company.