NEW YORK – Thousands of small minority-owned businesses were at the end of the line of the government’s coronavirus relief program, as many struggled to find banks that would accept their demands or were disadvantaged by the terms of the program.
Paycheck Protection Program data released on December 1 and analyzed by the Associated Press shows that many minority homeowners desperate for a relief loan only received it in the last few weeks of the P3, while many other homeowners white businesses were able to obtain loans earlier in the program
The program, which began on April 3 and ended on August 8 and granted 5.2 million loans worth $ 525 billion, has helped many businesses stay on their feet during a period when Government measures to control the coronavirus have forced many people to shut down or operate at reduced capacity. . But he has struggled to keep his promise to help communities that historically have not received the help they need.
Congress approved a third round of $ 284 billion in PPP loans. While businesses that have not obtained loans before have another chance to be helped, according to a bill, businesses hard hit by the virus outbreak will be eligible for a second loan.
The first round of the program saw overwhelming demand, and the Small Business Administration approved $ 349 billion in loans in just two weeks. But many minority-owned businesses applied to multiple banks at the start of the program and were turned down, while others were unable to get the banks to respond to their inquiries and inquiries.
“A lot of our businesses were turned down in the first and second rounds of funding. It caused candidate fatigue and frustration, ”said Ron Busby, president of the Black Chambers of the United States, a national chamber of commerce.
Loan data analyzed by zip codes revealed that in this first round of funding, six loans were approved per 1,000 people living in the 20 percent of zip codes with the highest proportions of white residents, nearly double the rate of loans approved for people living in the 20 percent of zip codes with the smallest proportions of whites.
That trend reversed in the last four weeks of the second round, in part because banks responded to criticism by making it easier to apply for the loan. Throughout the program, the number of approved loans increased and stabilized at 14 loans per 1,000 residents in the most zip codes with the most and least white-owned businesses.
Yet minority owners were forced to wait while their businesses were in jeopardy.
“A lot of them cling to the skin of their teeth. Most are in professional services, small retail stores, restaurants, hair salons,” said Ramiro Cavazos, president of the Hispanic Chamber of Commerce of the United States. .
Recent data from the SBA provided a more in-depth look at companies that received loans than data released on July 6. Previous data provided only limited details on loans under $ 150,000; the government initially refused to disclose more information about these borrowers, citing confidentiality concerns. The AP and other news organizations successfully sued under the Freedom of Information Act to make data on all PPP loans public, leading to the latest publication.
The SBA did not address the timing of minority-owned business loans when the PA asked for comment. But spokeswoman Shannon Giles said in an email that $ 133 billion, or 25%, of PPP funding went to companies in economically disadvantaged areas known as historically underprivileged zones of activity. used, and 27% had gone to low- and moderate-income neighborhoods.
The bill that President Donald Trump enacted on Sunday foresees that $ 15 billion will be set aside for community banks, minority-owned financial institutions and community development financial institutions, non-bank lenders who aim to raise finance for underserved communities.
AP analysis shows that restaurants hit by the virus outbreak got the most loans in the first round, but they were followed by companies in two high-income professions: law firms and doctors’ offices. At the end of the first round, millions of small businesses were waiting.
The disparities in the program were apparent from the start. An AP analysis of the original data release found that some of the country’s largest banks initially processed larger loans. This included loans to well-known and well-funded companies including Shake Shack, Ruth’s Chris Steakhouse and the Los Angeles Lakers. Many have returned the money.
In addition, the conditions of the program made it possible to exclude minority-owned businesses. One of the main purposes of the loans was to allow homeowners to continue paying employees who would otherwise be unemployed. For example, companies without an employer or companies with owners but no other staff were only allowed to apply for a week after the start of the program.
Of the 2.6 million black-owned businesses operating before the pandemic, 2.1 million were businesses without an employer, according to the Black Chambers of the United States.
This has discouraged many minority owners, Busby says.
“This program was made available for payroll and so many companies did not have payroll and did not apply,” he says.
Minority-owned businesses and other very small businesses were also initially excluded as some banks refused to process inquiries that did not come from established customers with multiple accounts. Many of these banks have ended this practice after being publicly criticized. The SBA, which initially had over 3,000 lenders in the program, eventually attracted 2,000 additional banks, non-bank lenders, and online lenders, allowing more minority applications to be approved as the PPP was moving forward.
“A lot of our Hispanic businesses in the first round never got a response from their banks or were turned down. They had to wait until the second round, and many had to leave their banks and go to a community lender or a community lender. minority nonprofit. manage the agency, ”says Cavazos.
Lisa Marsh tried unsuccessfully to get the banks to process her request. She first applied in June, but was unable to get answers about her status at her bank, a subsidiary of a large national bank. It also got nowhere with the small community banks.
Marsh, owner of MsPsGFree, a Chicago-based gluten-free bakery company, finally applied through an online lender in late July and got his loan a few days before the PPP ended.
“I was very frustrated and almost gave up,” she says.
The lack of a banking relationship was one of the reasons cited by the New York Federal Reserve for the disparities in PPP loan approvals to black and white-owned businesses. The study based on the first release of SBA data found that in areas of the country where there were concentrations of black-owned businesses, the percentage of loans was well below the national average. For example, only 7% of businesses in the Borough of the Bronx in New York and 11.6% of businesses in Wayne County received P3 loans, compared to almost 18% of businesses nationwide.
Community outreach has helped turn the tide. Community development finance institutions connected with local minority-owned businesses and helped them apply in the second round, says Claire Kramer Mills, co-author of the New York Fed study.
“The disparities that were found earlier were really appalling,” says Mills.
The outreach has brought in thousands of last-minute applications, according to SBA data.
MBE Capital, a lender focused on minority-owned businesses, received a pledge in mid-May from NBA Hall of Fame member Magic Johnson to fund $ 100 million in PPP loans.
MBE loans accounted for nearly a quarter of approvals on the final day of the PPP, according to the AP analysis. More than half of the company’s loan approvals took place in the last three weeks of the program. MBE did not respond to requests for comment.
Busby noted that the PPP was supposed to help underserved communities.
“We know that didn’t happen,” he says.
AP Data Journalist Justin Myers reported from Chicago