Closing The Gap

Shut out of PPP loans, struggling with no child care: How Covid-19 is impacting women-owned small businesses

Portrait shot of a restaurant owner putting a closing down poster into a door window due to Covid-19 outbreak.
Photo credit: Getty Images, Kanawa_Studio

On March 16, San Francisco Mayor London Breed issued a stay-at-home order for the city, forcing many local businesses to shut down amid the coronavirus pandemic. One of those businesses was popular flower company Farmgirl Flowers, which was started over nine years ago by Christina Stembel.

The company, which provides customized flower arrangements to clients across the country, was on track to have a record year after opening a second distribution center in Ecuador in January, says Stembel. But, with the coronavirus outbreak sweeping across the world, Stembel says all of that has since changed.

CNBC Make It spoke to Stembel, and other female entrepreneurs, about the impact today's pandemic is having on their companies as they fight for federal funding, pivot business operations and manage child-care needs.  

Farmgirl Flowers founder Christina Stembel.
Photo credit: Christina Stembel

Locked out of the Paycheck Protection Program

Within the first week of closing the doors at Farmgirl Flowers, Stembel says sales dropped by 60% and roughly $150,000 worth of flowers had to be discarded. Additionally, her 197-person team had to be cut to 40 people due to a slowdown in business operations. Thankfully, Stembel says, she was able to link many of her laid-off employees with another local company that was hiring.

To cope with the downturn in business, the San Francisco-based entrepreneur applied for the Paycheck Protection Program, a Small Business Administration (SBA) loan that is intended to help small business owners stay afloat during the COVID-19 crisis. Prior to the first round of funding being distributed in early April, Stembel says she researched everything she could about the program. This included, she says, sitting on six conference calls, including one with Ernst & Young, to get insight on how the loan would work. 

"I was able to have access to information that other small businesses weren't," says Stembel, who sat on the Ernst & Young call because she was a past participant in the firm's Entrepreneurial Winning Women program, which provides additional resources to a selected group of female entrepreneurs.

Using her YouTube channel to share the knowledge she learned from her network, Stembel says she received a lot of feedback from other small business owners who had no clue how the PPP loan would work. "I've gotten hundreds of emails from all the information that I've put out there from people being like, 'I just didn't know that it was going to run out?' And, I knew from all those conference I made sure I was ready."

When the SBA launched its first round of $350 billion in government loans on April 3, Stembel was on her computer and ready to send her documents at 12:01 a.m. But, after being unable to submit her information through her bank's website, she called her bank and was told that it was going to "take five to nine business days for them to get their system up and ready." Eventually, after waiting a few days, Stembel was able to submit her application. But, like many women and minority small business owners, she was denied a loan as funds for the program quickly ran out by April 16. 

"You know, most of the businesses that were prioritized already had access to capital," says Amaya Smith, who co-owns a beauty boutique in Washington, D.C. called Brown Beauty Co-Op with her friend Kimberly Smith. "We've seen the stories about Shake Shack and the Lakers giving back money. This program was supposed to be targeted at small businesses and unfortunately, I think it's exacerbating a lot of the disparities we already saw in funding."

According to some experts, up to 90% of minority and women small business owners are predicted to be denied a PPP loan because financial institutions are favoring pre-existing customers when distributing the funds. Though this may sound like a rational idea for banks, Joseph Parilla, fellow at the Metropolitan Policy Program at the Brookings Institution, explains why this method is unfair for many.

In 2018, the average size loan for women-owned businesses was 31% less than the average size loan for male-owned businesses, according to online credit marketplace Biz2Credit. Additionally, with large banks approving 60% of loans by white business owners, compared to 50% of loans by Hispanic business owners and 29% of loans by black business owners, Parilla says it was impossible for the PPP loan to be equitable.

Brown Beauty Co-Op founders Kimberly Smith and Amaya Smith.
Photo credit: Brown Beauty Co-Op

Adjusting business operations

When the coronavirus outbreak first began in early March, Kimberly and Amaya were already taking steps to adjust their business model in order to keep their company afloat. They immediately started following CDC guidelines to ensure there weren't large groups of people in their store at one time and they started offering hand sanitizer to every customer who walked through their door. Eventually, they pivoted to offering a pick-up option for in-store products, before officially closing their doors on March 25. 

"I can say we've seen a decline of about 75-85% in revenue," says Kimberly, while explaining that most of their product sales have always happened in store. 

To stay connected with their customers and to keep some level of funds coming in, Kimberly and Amaya have been directing people to their website to buy products. They've also been offering virtual consultations to clients who want to know more about a product before purchasing. 

"You know, we are really out here hustling," says Amaya, while detailing that they have also started a GoFundMe page to make ends meet. So far, thanks to customer support, the two co-founders have raised over $5,000 to help with business operations.

"Obviously, GoFundMe is coming in faster than the PPP loan," says Kimberly, while explaining that they are still waiting to hear back on whether or not they will receive money from the second round of SBA funding launched on April 27. 

Allegra LaViola, owner of Manhattan-based art gallery Sargent's Daughters.
Photo credit: Belathee Photography

Managing child-care needs

In addition to waiting on approval for a PPP loan, Allegra LaViola, who owns Sargent's Daughters art gallery in Manhattan, is also facing the overwhelming responsibility of being an entrepreneur without child care. 

Like many parents, she and her husband paid tuition ahead of time for their 2-year-old to remain in daycare for the summer while they worked. But, with daycare and schools being shut down, LaViola says they are now paying for a service they are not receiving and it's unlikely they will get money back. 

In the event that her gallery and other businesses open up sometime soon, she says child care will still be a priority. Though she and her husband are both working from home now, LaViola says under normal circumstances they are both out of the house with her husband working in an office and she at her art gallery. 

"How can I work if I have to take care of a very small child who cannot be physically left alone," she says, while explaining that her son's school is closed for the entire summer. "Financially speaking, so much of our daycare was already paid upfront so we have already used up our child-care budget. So, even if I could find a babysitter who is willing to babysit my kid, how am I going to pay for it?"

LaViola emphasizes that the stress around child care is only an added burden to the many other difficulties she's facing as an entrepreneur with a brick-and-mortar location. Luckily, she says, she only has one paid employee, who has been understanding of the need for her hours to be cut back. And thankfully, LaViola says, she was able to negotiate a deal with the landlord at her gallery to get a discount on rent. But, if things keep going the way they are without any funding coming in, the mom and entrepreneur says she's unsure of what the future will hold. 

"I just don't know how long I can do this for." 

For more info on small business resources or PPP loan funding, visit CNBC's Small Business Coronavirus Resource site here.  

Check out: The best credit cards of 2020 could earn you over $1,000 in 5 years

Don't miss: Why long-term flexible work options could be a game changer for women

Teachers offer homeschooling advice during coronavirus
Teachers offer homeschooling advice during coronavirus