COVID-19

Feds’ guidance hurt minority-owned businesses’ PPP chances, report says

Justin Ho Oct 19, 2020
Heard on:
HTML EMBED:
COPY
Larger companies initially took advantage of the Paycheck Protection Program, which was intended to offer forgivable loans to smaller businesses. Kameleon007 via Getty Images
COVID-19

Feds’ guidance hurt minority-owned businesses’ PPP chances, report says

Justin Ho Oct 19, 2020
Heard on:
Larger companies initially took advantage of the Paycheck Protection Program, which was intended to offer forgivable loans to smaller businesses. Kameleon007 via Getty Images
HTML EMBED:
COPY

As the White House and Congress continue talks about a new relief bill, we’re learning more about how the last one played out — especially when it comes to the Paycheck Protection Program. 

A new report from the House Select Subcommittee on the Coronavirus Crisis found that the Treasury Department suggested that banks should favor their existing customers when they applied for Paycheck Protection Program loans. That meant that some businesses, especially ones owned by women and minorities, were left out in the cold. 

Back in April, J. Craig Gordon tried to apply through a bank for a PPP loan for the home health care company he runs in Savannah, Georgia.

“It wasn’t a situation where we could even get an application in,” he said. 

He didn’t have a relationship with that bank. He tried applying through another bank. No luck there, either.

Gordon cut his own salary and put expansion plans on hold.

“The next layer of cuts unfortunately was gonna probably have to be some administrative layoffs. But thank goodness we weren’t in a situation where we had to do that,” he said.

Hurdles like the ones Gordon had to clear discouraged many Black business owners from applying for PPP loans, said Amanda Ballantyne, executive director of the small business advocacy group Main Street Alliance.

“Black business owners were 50% more likely than white business owners to believe they wouldn’t be approved and were three times more likely than white business owners to be unaware that the program even existed,” she said. 

A Main Street Alliance and Color of Change poll found that almost half of Black-owned small businesses have either shut down already or will soon.

And even for those that managed to stay open, the pandemic recession is likely to do long-term damage, said Rashad Robinson, president of Color of Change, a racial justice nonprofit.

“They maybe lose connections with some of their customers, with the supply chain, maybe for materials or other things necessary to keep the business alive,” he said.

That damage to businesses, Robinson said, makes Black communities more susceptible to gentrification.

This piece has been updated to include the names of both groups that conducted the survey of Black-owned businesses.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.