The state of Black business in Minneapolis

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A chat with Erik Hansen, director of economic policy & development 

The needs of the Black business community in Minneapolis have been apparent for many years. But year after year Black business owners ask the same major questions — when will we have fair access to capital and when will the development of Black businesses become a priority on the city’s revitalization radar? 

The West Broadway business corridor comes to mind. Although there has been sporadic activity over time, the area has been waiting on comprehensive redevelopment since 1973, according to Erik Hansen, the director of economic policy & development for Minneapolis.

Last month’s Black Business Week events and other initiatives in conjunction with National Black Business Month in August showed unified efforts of Mayor Jacob Frey and Council President Andrea Jenkins to change the perception of neglect of Black businesses.

Still, disparities persist. One example is the city’s two-percent loan program, one of its longest-tenured programs dating back to the 1980s, in which the city matches private investments into small businesses. A 2019 review of the city’s two-percent loan program found that the match was 80% smaller for Black businesses than for White-owned businesses.  

Hansen recently shared policy insight, information on available resources, and future strategies for strengthening Black-owned businesses in Minneapolis.

Erik Hansen

MSR: What is the cause of the private funding disparity between White and Black-owned businesses?

Hansen: Although we don’t have definitive proof of what’s causing the investment disparity, I can only give you some assumptions. We have not specifically answered that because it’s another research question that takes time to answer. Our efforts are always in good faith, but not perfect and we’re not close to where we are trying to go. 

The truth is that the city has a history of investing in Black businesses, whereas private investors do not. There are a lot of other complicating factors. For example, when walking into banks, Blacks are not given the benefit of doubt. Because we live in America, there is either an intentional or unintentional bias that’s ingrained in almost everyone, which sometimes makes it very hard for us to do the work we are trying to do.

MSR: How did the pandemic affect the City’s commitment to small businesses?

Hansen: We never lost our focus. When the pandemic started, we immediately took the two-percent loans fund and converted it into small forgivable loans for COVID-impacted businesses. Because we can’t have race-based programs in the city of Minneapolis, we can, however, look at areas of need based on geography in which people could apply for those loans. 

We had 173 loans that were either $5,000 or $10,000, depending on needs. The reported losses in April of 2020, for the first two months of the pandemic, were over $110 million. So the $1.5 million that we invested wasn’t going to accomplish much, but it was better than nothing. Some 45% of those recipients were Black businesses. 

MSR: Is there public data on the loans and recipients?

Hansen: Yes. We provided this information for program transparency. We provided a link that lists the name of the business and the amount received. The summary of the City’s COVID-19 Forgivable No-Interest Loans for Small Businesses Program is as follows:

• Total Applications: 1189

• Number of Applications from Eligible Areas: 817

• Total Number of Approved Loans: 173

• Total Dollar Value of Loans: $1,550,000

MSR: Are there plans for more forgivable loans?

Hansen: We are back to the conventional two-percent loan program, but we are trying to be smart about how we invest to help the Black middle class. We are trying to get some funding through the mayor’s budget proposal. We will seek to support organizations like the Black Women’s Wealth Alliance and the Dreamland project. Those are straightforward investments as opposed to more complicated funding of privately owned businesses.

We contemplated looking at loans in the hospitality industry, but all of our hospitality businesses are licensed, from food prep to handling liquor—we have about 5000 of those businesses in Minneapolis. 

We determined that the funding we had would maybe serve a hundred of them and it creates a lottery-type situation, which creates more people who are mad than happy. 

Unfortunately, when we invest those [small] amounts into these businesses you just don’t see the overall economic impact. But there is a special condition happening in the 38th and South Chicago Avenue area that’s home to George Floyd Square where we can more easily make the case for economic infusion.

So we’re looking into long-term investments, offering the best return on investment, because we only have limited funding. The other thing we’ve done and will continue to do is look to the state of Minnesota, an entity that has a different scale of authority to fund and can help bridge the inadequate service gap that we face in trying to meet the needs of our communities. The Minneapolis Foundation is the Main Street grant facilitator for this area. They have been up and running for about nine months.

 If you just look at damages caused by unrest, we estimate the cost is about $350 million. That’s an estimated guess based on insurance costs and a property evaluation survey that we conducted. We do think the economic impact is much higher than that because it caused intangible impacts in getting businesses back up and running and affecting the cost of living in surrounding areas. 

For example, it’s more expensive to live in areas that surround areas of unrest. Also, in areas of unrest, you are more than likely to experience an insurance rate hike. 

Simply put, the cost of doing business just went up because now there is added cost for security and often new leases when businesses are re-established.

MSR: In terms of displaced businesses, are there plans to help them return?

Hansen: We are now at a place where we can focus on those having the most trouble coming back. We’ve started a recovery team that I lead. This team consists of all city departments that are needed to help displaced businesses get reestablished on solid footing.  

We are also trying to increase our conversations around the availability of resources because the city has technical programs, small business accounting, planning, and technical assistance for real estate development; it is all about awareness. 

In America per se there is a secret handshake—if you know people you get the resources. We have programs and services for everyone but if you don’t know they’re available you are likely to miss out.

We have been fortunate in Minneapolis to have many community-based organizations. That’s how we get the word out about our services and programs. Without these organizations, we would not be so bullish about our outcomes. But we do recognize a gap on 38th Street. So, under the leadership of Councilmember Jenkins, we are working on how to get resources to help with the economic development plan for that area. 

MSR: There are many shuttered or dilapidated properties along West Broadway. What are the city’s plans to demolish, renovate, or rebuild these properties?

Hansen: Admittedly, we have not been as strong with our commercial property oversight in the city. But we are working to change that. We have codes in place, we just need to enforce them when the time comes. 

Owners of these properties weigh the option of paying fines rather than eating the cost of millions of dollars in renovations or a total rebuild. That’s why some property sits unusable for so long. It’s easier to simply pay the fines. 

Where we understand that these real estate owners operate businesses, we also understand that underutilized commercial property robs the community of a possible resource center or the addition of another Black-owned business.

MSR: We see cultural districts thriving with Asians, Latinos, and Somali businesses.  Those businesses have successfully gathered on Lake Street and near the U of M in Minneapolis, and along University Avenue in St. Paul. Why has it taken so long to see a similar structure for African American businesses in the Twin Cities?

Hansen: I don’t have that answer but it’s something to be explored. You see this in many other cities but not here. The Black middle class in Minneapolis-St. Paul is scattered. I think along with the mayor’s office, Black business owners and advocacy organizations are having that very discussion among themselves as to why this has not happened. 

The discussion with the mayor’s office included those exact questions by Black business owners and community leaders—why is it taking so long for Blacks to have cultural business districts and what is the city going to do to assist with this economic transformation? But certainly rebuilding the Black middle class needs to be a priority.

But as I said on the first day of Black Business Week, the construct of our society didn’t happen in a vacuum, but instead because of deliberate public policies and choices by private investors that consistently feed into the concept of the haves and have-nots. There is a clear anti-Black sentiment in this country that even predates the formation of our government.