Local businesses — especially those owned by women and people of color — have suffered mightily since the pandemic shutdowns began a year ago. Within months, more than 3 million, or 22 percent, of all small businesses closed, the largest drop on record. Of those, 41 percent were Black-owned and a quarter were owned by women, a number the National Bureau of Economic Research called “unprecedented.”
These entrepreneurs make up the fabric of our communities and fuel our economy, but typically they have no financial cushion to fall back on. While Congress committed billions in relief for small businesses, that money failed to reach many of those that need it most. More than half of federal Paycheck Protection Program loans were swept up by large corporations before many small local businesses even figured out how to apply.
It quickly became clear that giving as usual wasn’t going to cut it. Our foundation has long provided microloans to entrepreneurs, but the last thing they needed in this horrific moment was more debt.
My husband, Raymond Wurwand, and I were well aware of the problems these businesses faced obtaining access to credit and staying afloat even in the best of times. We are immigrants and entrepreneurs ourselves who built our small Los Angeles skin-care business, Dermalogica, into a global brand. The Wurwand Foundation’s FOUND/LA initiative, launched in 2018, has connected hundreds of underserved entrepreneurs with funding, coaching, and support from a like-minded community.
But these traditional forms of support could not provide the immediate relief small businesses needed during this time of crisis. The tipping point came for us when we learned last fall that our favorite local bookstore was asking for donations in a desperate effort to stay open. That was the impetus we needed to revamp our giving approach. Rather than loans, we decided to start offering grants — a no-strings-attached lifeline to get these businesses to the other side of a crisis they could not have planned for and did not cause.
In December 2020, we launched the FOUND/LA Small Business Recovery Fund and committed $1 million in grants to help protect entrepreneurs across Los Angeles, where roughly 20 in 1,000 small businesses have temporarily or permanently closed since last March — among the highest in the nation. To ensure the grants meet Internal Revenue Service rules, we enlisted the help of two nonprofit partners to run the program. We are providing $500,000 grants to each nonprofit, and all funding goes through them.
3,000 Applications
We announced the first round of grants by reaching out to our network of nonprofits, city officials, business owners, and management consultants to ensure that anyone connected to the Los Angeles entrepreneurship world heard the news. We received more than 3,000 applications from restaurants, salons, coffee shops, gyms, retail stores, and daycare centers. Ten grant recipients were selected by random lottery, and funds were deposited into their accounts on Christmas Eve.
Subsequent rounds were launched in January and February, with our final round taking place this month. Each recipient expressed the sentiment that without this funding, they didn’t know if their business would survive. Many cried with relief.
One of the first-round recipients was Adrianna Cruz-Ocampo, owner of U-Frame-It Gallery, a custom frame shop with two Los Angeles locations.
Her story is typical: Her sales were cut it half when she was forced to keep her stores closed during the pandemic. While she did receive a PPP loan from the federal government, another loan from the Small Business Administration was sent to the wrong person by mistake.
Despite repeated attempts to resolve the problem, she’s still being invoiced for payments on a loan she never received.
Throughout all this, she kept her employees on the payroll, even as she fell behind on rent. She was given a $22,500 grant in our first round — a bridge to what she hopes is the other side of the pandemic shutdown.
A Blueprint for Others
We believe our direct-giving approach offers a blueprint for other philanthropic organizations, not only in prioritizing the needs of local entrepreneurs, but in rethinking funding strategies overall. While many of us have carefully structured our funding philosophies and strategies to achieve maximum results, we can no longer rely on outdated models of giving. Grant making is notorious for its bureaucratic processes, but now is not the time to burden potential beneficiaries with strict application requirements or reporting hurdles.
The eligibility and documentation requirements to receive grants from our Small Business Recovery Fund are simple. Any small-business owner with a brick-and-mortar operation in Los Angeles County can apply if they have fewer than 20 employees and have been affected by the pandemic.
We leave it up to each business owner to decide how to use the money, although most recipients apply the funds to recurring operational expenses such as rent and utilities. The lottery approach allows anyone who is eligible an equal shot at being selected, and those businesses not selected in one round automatically roll into the next round for another chance.
Growing Interest
The approach is already catching on with other philanthropists. We recently received inquiries from two families in our area who are interested in setting up similar funds. We are now creating a central hub for other donors who are looking to help small businesses during this time of extreme need.
One bit of advice I give to budding entrepreneurs is: “Don’t do what everyone else is doing — do what they’re not doing.” Identify the deep pain points in the market, find the biggest gaps of need, and then fill them. The same is true of philanthropy, especially during the type of crisis we have faced this past year.
The philanthropic world needs a new and more inclusive template for doing business. We need to look at new partners in our communities, such as mutual-aid networks and grassroots organizations that we can work with to identify need and set up funds like ours. Whether we are addressing food insecurity or helping struggling small businesses, we need to collaborate, share our resources, and act quickly — just like the entrepreneurial thinkers we are supporting.
What we each do now to support small businesses could change the trajectory of our neighborhoods and communities for generations to come. Not only do small businesses strengthen our economy and make our communities vibrant, they account for nearly half of all jobs in the United States. But more than that, they make up the character and soul of our neighborhoods. If they vanish, our sense of place and belonging will vanish with them.
