Small businesses are finding it hard to rebuild after riots

When rioters were burning some businesses, owners of some establishments appeared unshaken. “Burn up my business”, they said, “businesses can be rebuilt, but justice needs to be served”.

Turns out, rebuilding is not so easy, especially for small businesses. As the Star Tribune reports, while big companies like Speedway and Target are rebuilding, small businesses remain torched up and boarded. Some are waiting for assistance from the state in order to rebuild.

It shouldn’t be surprising that businesses are having such a hard time rebuilding. The coronavirus-induced shutdowns have shown, more than anything, just how financially fragile small businesses are. Small businesses tend to operate on razor-thin margins and they have very little cash on hand. This is especially true for businesses in the service industry, like restaurants.

This will hurt low-income individuals and neighborhoods

This has serious implications, especially for low-income individuals and neighborhoods.

Small businesses, as research continues to show, are the backbone of the economy. They are the drivers of job creation as well as job growth. So, if they do not reopen, torched-up areas in Minneapolis will be missing out economically.

Not only that, but these losses will likely compound, and here’s why. People generally like to open a business in a place that has the necessary infrastructure for their operations. Similarly, workers are attracted to areas that offer better economic opportunities. Or in other words, growth begets even more growth. So, if these existing small businesses fail to rebuild, it will be hard for these areas to attract other businesses, high-income workers, and potentially innovative services that accompany growth. It will take a long time for the area to catch up to these benefits due to the compounding effect.

It doesn’t help that there is so much uncertainty surrounding the Minneapolis Police Department either. People want to live and invest in an area that is protected. But for Minneapolis, especially with what happened to the third precinct, that sense of security will take a long time to create.