Minority-owned companies have recently received loans, the latest PPP data shows

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Thousands of minority-owned small businesses were at the end of the government’s leadership Coronavirus help Program as many minority owners struggled more than white owners to find banks that accepted their applications or were penalized by the program’s terms, according to an Associated Press analysis of soft government loans.

Data from the Paycheck Protection Program, published December 1 and analyzed by the Associated Press, shows that many minority owners desperate for an aid loan did not get one until the final weeks of the PPP, while many more white business owners were able to earlier Get Loans Program.

The program, which began April 3 and ended August 8 and issued $ 5.2 million in loans valued at $ 525 billion, helped many businesses stay on their feet at a time when government measures to control the coronavirus forced many to close their capacities or to work with reduced capacity. But it struggled to keep its promise to help communities that in the past did not get the help they needed.

Congress approved a third round of $ 284 billion in PPP loans. While businesses that have not previously received credit have another chance for help, businesses severely affected by the virus outbreak can get a second credit, according to a draft law.


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The first round of the program saw overwhelming demand and the US Small Business Administration approved $ 349 billion in loans in just two weeks. But many minority-owned companies applied to multiple banks at the beginning of the program and were rejected, while failing to get other banks to respond to their requests and inquiries.

“Many of our companies were rejected in the first and second rounds of funding, which led to application fatigue and frustration,” said Ron Busby, president of the US Black Chambers, a nationwide chamber of commerce for black-owned companies.

Credit data analyzed by zip code found that the first round of funding approved six loans per 1,000 residents in the 20% of zip codes with the highest percentage of white residents, almost double the credit rate for living people in the 20% of the population Postal codes with the least amount of white.

Reversal of fate

This pattern was reversed in the last four weeks of the second round, also because the banks responded to the criticism by making it easier to apply for a loan. During the entire course of the program, the number of approved loans rose and leveled off at 14 loans per 1,000 inhabitants in most of the postcodes with the most or few companies in white hands.

Still, minority owners had to wait – and wait – while their businesses were at risk.


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“Many hold onto their teeth. Most work in professional services, small retail stores, restaurants, and barber shops,” said Ramiro Cavazos, president of the United States’ Hispanic Chamber of Commerce.

The latest data from the SBA provided a deeper insight into the companies receiving the creditable loans than the data released on July 6. The earlier data provided limited details on loans below $ 150,000; The government initially refused to provide any further information on these borrowers, citing privacy concerns. The AP and other news organizations successfully sued the Freedom of Information Act to make data on all PPP loans public, leading to the latest release.

The SBA did not address the timing of lending to minority owned companies when asked for comment by the AP. However, spokeswoman Shannon Giles said in an email that $ 133 billion, or 25% of PPP funding, went to companies in economically deprived areas known as historically undeveloped business areas and 27% went to companies located in Operate in low- and middle-income areas.

The law, which President Donald Trump signed on December 27, provides for $ 15 billion to be allocated to community banks, minority-owned financial institutions, and community development financial institutions.

The AP analysis shows that restaurants hit by the virus outbreak got the most loans in the first round, followed by businesses in two high-income professions: law firms and medical offices. When the first round ended, millions of small businesses had to wait.

The disparities in the program were evident from the start. An AP analysis of the initial data release found that some of the country’s largest banks had processed larger loans first. Including loans to well-known and well-funded companies such as Shake Shack, Ruth’s Chris Steakhouse and the Los Angeles Lakers. Many returned the money.


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In addition, the conditions of the program helped to exclude minority-owned companies. A primary goal of the loans was to enable owners to keep paying their employees who would otherwise become unemployed. Non-employing firms or companies that have owners but no other employees were not allowed to apply until one week after the program began.

Of the 2.6 million black companies that were in business before the pandemic, 2.1 million were non-employers, according to the U.S. Black Chambers.

That discouraged many minority owners, Busby said. “This program was made available for payroll, so many companies didn’t have payroll and didn’t apply,” he said.

Minority and other micro-enterprises were also initially excluded, as some banks did not process applications that did not come from established customers with multiple accounts. Many of these banks stopped this practice after being publicly criticized. The SBA, which initially had more than 3,000 lenders in the program, eventually added 2,000 more banks, non-bank lenders and online lenders, resulting in more minority applications being approved over the course of the PPP.

“Many of our Hispanic owned companies never heard from or were turned down from their banks in the first round. They had to wait until the second round and many had to leave their banks and go to a municipal lender or nonprofit minority. “Run an agency,” Cavazos said.

Applications unanswered

Lisa Marsh tried unsuccessfully to get banks to process her application. She had applied for the first time in June, but could not get any information about her status from her bank, a subsidiary of a large national bank. Even with smaller community banks, she did not get any further.

Marsh, owner of MsPsGFree, a Chicago-based gluten-free baking company, finally applied through an online lender in late July and received her loan a few days before the PPP expired.


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“I was very frustrated and almost gave up,” she said.

The lack of a banking relationship was one of the reasons New York’s Federal Reserve Bank cited for inequalities in approving PPP loans to black and white companies. The study, based on the initial publication of the SBA data, found that the percentage of credit in parts of the country with concentrations of black-owned companies was well below the national average. For example, only 7% of businesses in the New York City borough of Bronx and 11.6% of businesses in Wayne County, Michigan, where Detroit is based, received PPP loans, compared with nearly 18% of businesses across the country.

Public relations has helped turn the tide. Community development financial institutions partnered with local minority-owned businesses and helped them apply during the second round, says Claire Kramer Mills, co-author of the NY Fed study.

“The differences we saw earlier were really appalling,” said Mills.

The reach resulted in thousands of last-minute requests, as the SBA data shows.

MBE Capital, a lender focused on minority owned businesses, received a $ 100 million PPP loan funding commitment from Magic Johnson, a member of the NBA Hall of Fame, in mid-May.

According to AP analysis, MBE loans made up almost a quarter of the approvals on the final day of the PPP. More than half of the company’s loan approvals came in the last three weeks of the program. MBE did not respond to requests for comment.

Busby noted that the PPP should help underserved communities.

“We know that didn’t happen,” he said.

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