Minority businesses left waiting for COVID relief

Paycheck Protection Program prioritized big firms in well-to-do areas

Minority businesses like the independently owned Harold’s Chicken Shacks in Chicago were left behind in early stages of the Paycheck Protection Program, a key part of the initial COVID relief package. (Wikimedia Commons/Tony the Tiger)

By Ted Cox

Minority-owned businesses were left waiting for coronavirus relief as a key program prioritized larger firms in more well-to-do areas, according to analysis by the Associated Press.

Drawing on data only recently released by the government, the AP reported last week that the Paycheck Protection Program, designed to give small businesses the funds to keep workers employed, prioritized White businesses in White communities.

According to the AP, “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.”

Critics have complained that the PPP loans were administered through banks, resulting in those banks prioritizing larger firms that already had established relationships with bankers. The larger loans also produced larger fees for the banks processing them. That left many minority-owned businesses on the outside looking in.

According to a breakdown of the data, in the initial stage of the program, six loans were approved for every 1,000 residents in the 20 percent of ZIP codes with the greatest proportions of White residents, almost twice the rate of loans approved in the 20 percent of ZIP codes with the smallest proportions of Whites.

PPP was intended to benefit small businesses hurt in the pandemic and the economic collapse it caused, most prominently restaurants. Indeed, the AP found that “restaurants slammed by the virus outbreak got the most loans in the first round” of relief, “but they were followed by businesses in two high-income professions: law firms and doctors’ practices. When the first round ended millions of small businesses were left waiting.”

The initial rounds of PPP loans saw 5.2 million approved worth $525 billion, but again with what turned out to be a discernible racial bias.

The AP quoted Ron Busby, president of the U.S. Black Chambers, as saying, “Many of our businesses were being turned down in the first and second round of funding. That caused application fatigue and frustration.”

The program was also slow to address the needs of mom-and-pop businesses where the owners are also the primary workers. According to the U.S. Black Chambers, of the 2.6 million African American companies in business before the pandemic, 2.1 million were “non-employer firms” of that sort. Without real payrolls, they were discouraged from seeking payroll relief.

The program tried to correct the bias toward the end of the second round of loans ending in August, as banks streamlined the application process. “Over the entire course of the program, the number of loans approved grew and evened out at 14 loans per 1,000 residents in the most ZIP codes with the most and fewest number of white-owned businesses,” the AP stated. “Still, minority owners were kept waiting while their companies were in jeopardy.”

Congress replenished the program with a third, $284 billion round of loans in the COVID-19 relief package signed by President Trump just before the end of the year. According to the AP, legislators tried to address criticism of the earlier rounds through “$15 billion to be set aside for community banks, minority-owned financial institutions, and community-development financial institutions, non-bank lenders that aim to get funding to underserved communities.”

Busby complained that was too late for some businesses, and that the PPP was supposed to help underserved communities from the outset. “We know that did not happen,” he said.

In Illinois, Gov. Pritzker has specifically targeted firms that fell between the cracks of federal COVID relief programs through the Business Interruption Grant program.