COVID-19

Minority-owned businesses struggle to access emergency loans

Amy Scott Apr 28, 2020
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There's criticism that smaller and minority-owned businesses didn't get their fair share from the first round of the Paycheck Protection Program funding. Spencer Platt/Getty Images
COVID-19

Minority-owned businesses struggle to access emergency loans

Amy Scott Apr 28, 2020
There's criticism that smaller and minority-owned businesses didn't get their fair share from the first round of the Paycheck Protection Program funding. Spencer Platt/Getty Images
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This should have been Terence Dickson’s big moment. He owns Terra Cafe, a restaurant and bar in Baltimore, Maryland. He’d just finished a new outdoor space, complete with fake grass and an old delivery truck he calls “Big Blue” serving as the bar.

“Right now, we would be outside, you would have the jerk grill going on, you would have some music, the jerk chicken would be popping,” he said. “This was it, baby. This was it.”

Instead, Terra Cafe is basically shut down, except for some takeout and delivery orders. Dickson has furloughed five of his 23 employees and used his savings to keep paying the rest. He’s a longtime customer of Bank of America, so when he learned about the Paycheck Protection Program, set up by Congress to help small businesses keep workers on the payroll, he applied on the first day.

On the phone, a banker walked him through the requirements. He had to have an existing account with the bank. “I said, ‘Good, I got you,'” Dickson recalled. He had to do online banking. “‘Good, I got you,'” Dickson said again

Then, the representative said Dickson had to have a credit card or a line of credit with the bank. That, he didn’t have.

“He told me that it wouldn’t work for me,” Dickson said. “I was literally stuck in my car for about 40 minutes, in utter silence.”

Terence Dickson owns Terra Cafe in Baltimore, Md.
Terence Dickson owns Terra Cafe in Baltimore, Md. (Amy Scott/Marketplace)

Dickson had come up against a big barrier that many other black-owned businesses have also faced. To get the PPP loans out quickly, banks prioritized the customers they knew best, which tended to be larger, more established businesses.

“If you’re a business of color, you have not historically had that relationship with banks,” said Ashley Harrington, director of federal advocacy with the Center for Responsible Lending. “Also, because of that you’re not as aware of the program and how it works, and no one is hand-holding you through the process like they are the wealthier clients.”

There are banks that cater to smaller and minority-owned businesses. The first round of small business relief excluded many Community Development Financial Institutions, which focus on lending in areas traditionally underserved by big banks. The initial $350 billion ran out within about two weeks.

“This is a missed opportunity,” said Lisa Mensah, president and CEO of Opportunity Finance Network, which represents many CDFIs. “You can’t reach the clients if you don’t reach their lenders.”

Congress approved a second round of $310 billion in loans. Banks began processing applications Monday, and many expect the funds to run dry within a few days. This time, $30 billion was set aside for banks and credit unions with less than $10 billion in assets, including community and minority-owned lenders.

“That’s about 97% of all banks and credit unions, so it’s still a crowded pool,” Mensah said.

Since Terence Dickson was turned down, Bank of America opened applications to businesses without an existing line of credit. He’s hoping he gets approved before the second round of money runs out.

COVID-19 Economy FAQs

How many people are flying? Has traveled picked up?

Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.

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Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.

Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.

What’s going to happen to retailers, especially with the holiday shopping season approaching?

A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.

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