Unfortunately, many business owners — notably, people of color — were left empty-handed after applying for the program, which first launched earlier in April.
“Based on how the program is structured, we estimate that upwards of 90% of businesses owned by people of color have been, or will likely be, shut out of the Paycheck Protection Program,” said Ashley Harrington, director of federal advocacy and senior council for the Center for Responsible Lending (CRL), according to CBS News.
Businesses owned by people of color account for 30% of all U.S. businesses, contributing 7.2 million jobs and $1.38 trillion in revenue to the economy. Recent appropriated #PPP funds will provide NO benefit at all to the vast majority of businesses owned by people of color. pic.twitter.com/ZDq6Mb45f5
The North Carolina-based nonprofit, which tracks abusive lending practices, recently analyzed the PPP’s qualification parameters. They found that 75% of Asian-owned businesses barely have a chance to reap some benefit, but it appears much harder for other minorities.
“Roughly 95% of Black-owned businesses, 91% of Latino-owned businesses, 91% of Native Hawaiian or Pacific Islander-owned businesses, and 75% of Asian-owned businesses stand close to no chance of receiving a PPP loan through a mainstream bank or credit union,” the CRL said on April 6. The program launched three days earlier with $349 billion in funds that depleted quickly, according to Forbes.
The House & Senate passed a bill last week to replenish funding for #PPP to help struggling small businesses hurt by the #COVID19 crisis. This bill is only a rescue plan if all businesses are included in the program, that includes small biz owners of color pic.twitter.com/DCsuYvfli4
One possible reason for the minority disadvantage is the fact that many banks participating in the program only issue loans to existing clients. According to Harrington, many business owners of color are less likely to have commercial banking relationships, which suggests that they have no credit history.
Additionally, major banks that offered the loans also prioritized applications for larger sums. Such preference reportedly puts minority- and female-owned businesses at a disadvantage, since their average sales, for instance, are only 50% to 90% of those made by male- or White-owned businesses.
TODAY: SBA will resume accepting #PaycheckProtectionProgram applications from participating lenders. Learn how to apply and find a lender near you.
The SBA resumed PPP on April 27 with replenished funding of $310 billion from Congress. However, its electronic filing system crashed within minutes, largely due to over a week of backlogged applications pouring through, The Hill reported.
On April 29, the federal agency announced that smaller financial institutions would have an exclusive window of time to submit their clients’ applications. This could be a chance for minorities to secure a loan.
“I am proud to share that beginning today at 4 p.m. through 11:59 p.m. (ET), SBA systems will only accept loans from lending institutions with asset sizes less than $1 billion dollars. This is to assure that small lending institutions are provided the opportunity to lend to small businesses providing increased opportunity for many entrepreneurs,” said Ashley D. Bell, SBA regional administrator and entrepreneurship policy advisor for the White House Opportunity & Revitalization Council.
For more information about the PPP, head over here.
Feature Image via Getty
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