By Kerry Hannon, Next Avenue
IyaSokoya Karade remembers clearly the day she had to close the doors of her business due to the pandemic.
Karade, 55, is the CEO and founder of the Athletic Arts Academy in Orange, N.J., a 10,500-square-foot youth athletics training facility. “Being a provider of in-person services, we were mandated to shut down March 16  and we were in a state of shock,” she said. “I had to embrace that reality.”
The first order of business was to try to stay alive. “The second thing: What are you going to do about your business? We were just throwing things at the wall,” she added.
After a few months Karade asked herself: “Do I even want to come out of this and continue? The debt was mounting. It was like watching water go into a bucket with a hole in it. And even though we were in the black, my business was not making me rich. I run it as a gift of the heart.”
The Scary Time for Entrepreneurs in the Pandemic
And, she added, “I have invested a lot of money, time and sweat equity to create this beautiful space. So, to see it go dark, even for a while, was scary.”
Karade is one of many small business owners over 50 slammed by the pandemic. Covid-19 has taken a serious toll on their personal finances. Many have waived salaries and taken money out of their personal savings to pay business expenses, sometimes endangering their current and future financial security.
The Federal Reserve Bank of New York and AARP recently published a study on this, “The State of the Older Entrepreneur During Covid-19,” and what they found wasn’t pretty.
During Spring 2020, at the peak of the first wave of Covid-19, more than 20% of small businesses closed, according to the report. But business closings were highest among business owners 45 and older (one in four). Although the total number of small businesses has recovered, the number of firms now owned by people 45+ is down 9%; by contrast, there’s been a decline of just 2% for firms with owners under 45.
The researchers’ interviews with 25 business owners who are 45 and older found that they — and particularly business owners of color like Karade — had difficulty accessing funds to stay open and have experienced significant personal financial hardship during Covid-19.
“While the pandemic has impacted entrepreneurs and small business owners across the board, our research shows that Black, Latino and Asian entrepreneurs have been particularly hard hit,” said Nancy LeaMond, AARP executive vice president and chief advocacy and engagement officer (and a Next Avenue Influencer in Aging).
Prospects for Older Entrepreneurs of Color
“Older entrepreneurs of color tended to dip into their own pockets, using personal funds to cover business expenses,” LeaMond added. “There could be significant implications down the road, as these folks now have less in savings for retirement or to help them weather another economic downturn.”
Similarly, a new small business survey by the 12 Federal Reserve Banks (“The 2021 Report on Firms Owned by People of Color” ), fielded last fall, found that Black business owners were more likely to use personal funds and more likely to borrow money from a spouse, family, or friends than any other group of entrepreneurs. Some 74% of Black business owners used their personal funds to keep their enterprises afloat; 38% borrowed money from a spouse or other family or friends and 25% worked a second job.
In the AARP/Federal Reserve Bank of New York study, more than double the number of Black and Asian small business owners (35% and 33% respectively) borrowed funds from family and friends than white owners (16%). And 70% of Black business owners paid business expenses with personal funds, compared to 48% for white owners.
One in four age 45+ owners is concerned about their personal credit score due to the pandemic, a fear that’s even higher among Black, Latinx and Asian owners.
Half of surviving firms with owners 45+ overall depicted their business’ financial condition as “fair” or “poor” at the end of 2020. But that was true for 75% of the Black-owned firms and 66% of the Latinx-owned firms.
“I would have thought that the situation would have been better for older entrepreneurs — they have longer credit history, they’re better established. But…