- Analysis by the Associated Press finds that many minority-owned businesses struggled for months to find a lender during the first round of Paycheck Protection Program funding
- Bank rejections, program requirements, and other factors often created headwinds for minority entrepreneurs
- Second draw PPP includes set-asides for minority-owned financial institutions and other lenders for traditionally underserved communities
Thousands of minority-owned businesses did not receive Paycheck Protection Program loans until near the end of the program, according to an analysis by the Associated Press. These business owners often encountered numerous hurdles in applying for a loan, delaying crucial financial assistance for months.
The analysis found that minority business owners frequently reported that they were rejected by multiple banks, or that they had not received a response from a lender. PPP requirements could also prove frustrating, such as a temporary exclusion of aid for non-employer companies – a designation applying to the vast majority of Black-owned businesses.
The AP also found that loans were twice as likely to be approved in ZIP codes with the highest proportion of white residents than they were to be approved in ZIP codes with the lowest proportion. However, lending to these communities accelerated in the weeks leading up to the program’s Aug. 8 expiration, and community development financial institutions were credited with connecting many minority business owners to funding.
While the $525 billion in PPP loans distributed to 5.2 million recipients has been credited with shepherding many struggling enterprises through the COVID-19 pandemic, the program has also received criticism for its susceptibility to fraud, concentration of funding on larger firms, and other shortcomings.
A second round of PPP funding in a recently approved stimulus bill provides $284 billion for second draw loans, but also seeks to address some of the problems with the initial program. These include more stringent requirements to direct loans to small businesses that have experienced significant revenue shortfalls, higher loans for harder-hit industries, and a simplified forgiveness process for loans of $150,000 or less.
In addition, the stimulus bill includes several provisions aimed at assisting minority business owners, including $15 billion for CDFIs, certified development companies, minority depository institutions, and SBA Microloan intermediaries.
