Small Business Community: What Happened to Mom and Pop?

Event Overview & Strategic Context

• Event Purpose: A CalMatters and Milken Institute co-hosted discussion addressing the outlook for California's 4 million small businesses, focusing on post-pandemic recovery, equity gaps, and future economic resilience.
• Key Demographic Impact: Federal Reserve data indicates approximately 9 million small businesses did not expect to survive 2021 without government assistance; the pandemic disproportionately impacted low-income communities, communities of color, and women-owned businesses.
• Federal Leadership Shift: Isabella Casillas Guzman was sworn in as SBA Director, bringing prior experience as California's State Small Business Advocate to oversee the Paycheck Protection Program (PPP), Restaurant Revitalization Fund, and $15 billion in disaster grants.
• SBA Portfolio Scale: The SBA's portfolio expanded from a typical $40 billion annually to over $1 trillion since the pandemic began, utilizing loans, grants, and debt relief to support 30 million small businesses.

Disparities in Relief Access & Data Points

• Exclusion Rates: Analysis of SBA data reveals that only 4% of PPP loans went to African American-owned businesses and less than 8% to Latino communities under the 7(a) working capital program.
• Long-term Risk: 41% of Black-owned businesses are projected not to return due to the crisis, with less than 10% of 504 loans (used for facilities) going to Latino communities.
• Banking Relationship Barrier: Access to relief was heavily skewed toward businesses with pre-existing banking relationships; those without "preferred lender" status or sophisticated bookkeeping faced immediate exclusion from the first round of funding.
• Grant Distribution Results: In the Restaurant Revitalization Fund, $18 billion of the $28.6 billion total was directed to underserved, women, veteran, and socially/economically disadvantaged businesses.
• Shuttered Venues Impact: The revamped Shuttered Venues Operator Grant program awarded $5.2 billion to over 6,800 cultural and performing arts entities.
• EIDL Performance: The SBA has delivered over 3.8 million Economic Injury Disaster Loans (EIDL) totaling over $218 billion, with an additional $3 billion in targeted grants for low-income communities.

Business Owner Case Studies & Operational Challenges

• Revenue Collapse Scenario: Lenore Estrada, owner of Three Babes Bake Shop, faced an 80% revenue drop when major corporate clients (e.g., Google, Lyft) shut down, forcing the layoff of 24 of 30 employees.
• Community Adaptation: Estrada pivoted to co-found "SF New Deal," a nonprofit that distributed over 50,000 meals to food-insecure populations by coordinating with 200 local restaurants, demonstrating a model of community-led resource distribution.
• Digital Divide Barriers: Service providers noted that many underserved business owners lacked digital literacy, requiring "drive-by" scanning services in parking lots to help them apply for recovery programs.
• Personal Liability Risks: Small business owners reported facing personal bankruptcy risks due to personal guarantees required for leases and loans, a vulnerability not present for venture-backed startups.
• Administrative Bottlenecks: California's Employment Development Department (EDD) experienced severe backlogs, causing unemployment benefit delays of up to six weeks, forcing owners to lend interest-free money to staff.

Industry Solutions & The "Five C's" Ecosystem

• CDFI Intervention: Community Development Financial Institutions (CDFIs) emerged as critical intermediaries, funding ~400 PPP loans totaling $8 million with an average of $20,000, targeting 70% loans to entrepreneurs of color.
• Technical Assistance Role: Small Business Development Centers (SBDCs) provided essential coaching on financial literacy, helping owners reorganize paperwork and apply for grants they would otherwise miss.
• Five C's Framework: CAMEO proposed a support framework consisting of Coaching (technical assistance), Capital (diverse funding sources), Connections (network building), Climate (local government support), and Culture (community engagement).
• Marketing Gap: Industry leaders identified a "best kept secret" regarding SBA services, noting that non-profits historically under-invested in marketing, leading to confusion among business owners about where to seek help.

Future Outlook & Forward-Looking Statements

• Infrastructure Opportunities: The SBA is repositioning to help small businesses access a $500 billion federal marketplace via the Bipartisan Infrastructure Framework and "Build Back Better" agenda, with a goal of increasing Disadvantaged Business Enterprise (DBE) contract goals by $50–$100 billion over five years.
• Program Evolution: The SBA is shifting toward a customer-centric, technology-forward approach, aiming to streamline the EIDL application process within weeks to expedite relief for high-impact communities.
• Community Navigator Pilot: A $100 million hub-and-spoke program was launched to fund trusted local organizations to connect underserved businesses with resources, though panelists reported significant implementation friction in finding "hub" administrators.
• Resilience Strategies: Experts advise businesses to diversify revenue streams, move financial records online for disaster readiness, and secure business disruption insurance to mitigate future shocks.
• Non-Debt Financing: For solopreneurs avoiding debt, recommendations include leveraging zero-interest loan products (e.g., California Rebuilding Fund), crowdfunding, and county-level grant programs.
• Equity Mandate: The SBA is explicitly directing staff to prioritize equity, ensuring that 96% of PPP loans in 2021 went to small businesses with 20 or fewer employees and focusing on rural and Low-to-Moderate Income (LMI) communities.