Minority-owned companies waited for loans, data show
NEW YORK — Thousands of minority-owned small businesses were at the end of the line in the government’s coronavirus relief program as many struggled to find banks that would accept their applications or were disadvantaged by the terms of the program.
Data from the Paycheck Protection Program released Dec. 1 show that many minority owners desperate for a relief loan didn’t receive one until the PPP’s last few weeks while many more white business owners were able to get loans earlier in the program.
The program, which began April 3 and ended Aug. 8 and handed out 5.2 million loans worth $525 billion, helped many businesses stay on their feet during a period when government measures to control the coronavirus forced many to shut down or operate at a diminished capacity.
But it struggled to meet its promise of aiding communities that historically haven’t gotten the help they needed.
Congress has approved a third, $284 billion round of PPP loans. While companies that did not get loans previously have another chance at help, according to a draft of the legislation, 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 firms applied to multiple banks early in the program and were rejected, while others couldn’t get banks to respond to their applications and inquiries.
“Many of our businesses were being turned down in the first and second round of funding. That caused application fatigue and frustration,” says Ron Busby, president of the U.S. Black Chambers, a nationwide chamber of commerce.
Loan data analyzed according to ZIP codes found that in that first round of funding, six loans were approved for every 1,000 people living in the 20% of ZIP codes with the greatest proportions of white residents, nearly twice the rate of loans approved for people living in the 20% of ZIP codes with the smallest proportions of whites.
That pattern reversed itself over the final four weeks of round two, partly because banks responded to criticism by making it easier to apply for a loan.
Still, minority owners were kept waiting while their companies were in jeopardy.
“Many are hanging on by the skin of their teeth. Most are in the professional services, small retail shops, restaurants, barber shops,” says Ramiro Cavazos, president of the United States Hispanic Chamber of Commerce.
The bill President Donald Trump signed into law Dec. 27 provides for $15 billion to be set aside for community banks, minority-owned financial institutions and community development financial institutions, nonbank lenders that aim to get funding to underserved communities.