Getting help for minority-owned businesses excluded from PPP loan relief

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After a bumpy start, the Paycheque Protection Program (P3P) money is flowing. As of Friday, May 8, the program had granted more than 2.5 million loans worth a total of $ 187.1 billion, or about 60% of the $ 310 billion available in the second round. This is great news, especially for small businesses and independent entrepreneurs excluded from the first round.

Despite this progress, PPP still has a huge problem. A Center For Responsible Lending (CRL) April 6 Report found that about 95% of black-owned businesses, 91% of Latino-owned businesses, 91% of native-owned businesses in Hawaii or the Pacific Islands, and 75% of Asian-owned businesses “n ‘have virtually no chance of receiving a PPP loan. through a traditional bank or a credit union.

Minority-owned businesses have been excluded for various reasons. They are less likely to have a relationship with lending banks, their owners may not have access to financial and legal expertise, or their payroll is not as large as that of other businesses. Even with adjustments of Financing of FinTechs and community banks, along with $ 60 billion set aside for community banks, CRL Federal Advocacy Director Ashley Harrington said that would not be enough and this approach “perpetuates the racial wealth gap and breeds public resentment and mistrust. ”

This is not the first time that communities of color have been excluded from sweeping government reform. This moment gives us the opportunity to explore and take important action to solve a monumental problem.

To figure out how to make meaningful change, let’s start with the three A’s: Awareness, Acceptance, and Action. Awareness involves taking an honest look at ourselves and our situation. Acceptance of this understanding allows us to evaluate and learn from this experience. This acceptance then leads to acting for the change we want to make.

I’ll use this framework to help us explore what can be done to help business owners of color access the financing they need and ultimately strengthen our global economy.

Consciousness

People of color have been excluded from government reform for centuries, from post-Civil War reconstruction to the New Deal during the Great Depression to the Great Recession of 2008. The book The Color of Money: Black Banks and the Racial Wealth Gap through Mehrsa Baradaran, delves deep into the history of discrimination in federal programs. The author demonstrates that “the hand that drives black poverty is not a natural and invisible hand, but rather the coercive hand of the state that has systematically excluded blacks from full participation in American capitalism.”

I wrote on the the racial wealth gap before, but these statistics are worth repeating

Discrimination doesn’t just affect black and Latino families. In the past, California has passed laws against Japanese businessmen after they became economically successfulful. American by birth were killed and their land washed away when oil was discovered there.

On paycheck protection, Forbes contributor Morgan Simon highlighted and explained these gaps for small businesses with owners of color:

  1. Many formerly incarcerated business owners were not allowed to apply.
  2. Banks set their own criteria to whom to lend and were encouraged to choose large customers over small businesses.
  3. People of color have been disproportionately excluded, but we don’t know exactly how many, as no government data has been collected on loan recipients by race or gender.
  4. 25% of the initial $ 2 trillion went to bailout big business.
  5. Only a tiny fraction has been set aside for the most vulnerable businesses and communities.
  6. Community Development Financial Institutions (CDFIs) – those institutions, historically with the deepest relationships with vulnerable communities – were hardly included.

These gaps are in addition to the massive damage that black and Latino populations have already suffered from COVID-19. According to the Associated Press, African Americans account for 30% of deaths from COVID-19 where race is known, although they only make up 14% of the population. A detailed sketch in the Atlantic shows how the government’s response to dealing with the pandemic reveals a deep bias and re-application of oppressive systems of the past.

As Ms. Baradaran writes in her book, “A critical first step in addressing the wealth gap is to recognize that it was created by racist public policy.” I hope we can take this opportunity to raise awareness in real time about this issue and help break the cycle of widening this divide.

Acceptance

Acceptance is a crucial intermediate step before taking action. Creating awareness around a problem is not enough to bring about change. Studies have shown this emotion, rather than logic, motivates us to act. This means that it is not enough to read statistics. We need to internalize them and make this understanding travel from our head to our heart. I believe we do this by listening to the stories of those most affected.

Real people die. Businesses fail. NBC News spoke with minority business owners who still struggle to obtain financing. Anger and frustration leap through the words on the page. “The financial industry hasn’t shown me love for 20 years,” said Terence Dickson, owner of Terra Café, a community-driven restaurant that offers Southern comfort and soul food. “I’m tired of hearing about money,” he added. “I want to see the money.” This frustration, anger, exhaustion, and resentment are all the energies we can use to create change.

This gap affects all of us, not just individual business owners and their families. Minorities have 8 million of the 30 million small businesses in the United States, accounting for 26.5% of the country’s small businesses. Businesses represent 7.2 million jobs and generate more $ 1.38 trillion to the global economy. In addition, some 68% of the country’s economic growth comes from consumer spending. Businesses that do not have capital or the ability to reopen will only hurt the economy as a whole.

There has never been a time when the statement “we are all in the same boat” is more relevant. My approach is to learn from the past to avoid making the same mistakes again in the future.

action

The last step is to act. For me, it’s about using emotion to energize the actions we need to take. I saw this in the case of the unjust murder of Ahmaud Arbery, and I believe that the frustration, anger and resentment in this situation can also be used to create effective change.

Correcting inequalities in PPP lending will require significant legislative reform. In a town hall last week Along with US Senators Ben Cardin and Marco Rubio, I was happy to hear them recognize that small businesses need extra attention, especially minority and women owned businesses. Senator Cardin believes there will be a third round of funding and he hopes that the target group for any additional stimulus would be small businesses in underserved communities. This support would include being more selective in companies that need money, rather than allocating funds on a first come, first served basis.

CRL also proposed additional legislative solutions:

  • Allocation of specific funding for CDFIs and minority depositories (MDIs)
  • Demand equitable access through banks and credit unions, including $ 50 billion allocated specifically to minority-owned businesses.
  • Expand eligible expenses
  • Eliminate ineligibility based on criminal justice involvement
  • Require all lenders to provide data, including borrower demographics and loan amounts.

While potential legislative action holds promise, I want those promises to be kept.

Even if you are not a legislator, there are things you can do within your own sphere of influence to make a difference.

I use what I call my three commitments – three commitments that I can make to help solve the problem. Here are mine:

  1. Increase awareness of this inequity through my different platforms
  2. Provide as much information as possible to help small businesses and independent entrepreneurs of color manage the ever-changing rules
  3. Help Small Businesses of Color access additional resources

Keeping the focus on ourselves and letting others do the same can have an aggravating effect. What are your commitments? Specifically, what actions can you take to create awareness or encourage acceptance. How can your actions create the change you want to see?

Some commitments that I have seen before include:

  • Talk about this problem in your social circle
  • Call your legislator to express your concern
  • Purchases of minority-owned businesses that are still in operation
  • Reach out to these companies and ask them what they need
  • Continue to educate yourself and spread the word about these injustices.

Once you’ve described what you can do, ask yourself:

  • How am I going to do ?
  • When will I do it?
  • Who can hold me responsible?
  • How does it feel to have this plan?

Again, we are all in the same boat. And we can all do something to combat this unfair and inequitable treatment.

If you are a small business and need additional information or resources during this time, you can find them here:

Getting money for your small business with the CARES Act

Frequently Asked Questions About Small Business Lending Under the Coronavirus Relief CARES Act

How to calculate salary costs for your paycheck protection loan

Banking and fintech companies accepting loan applications with paycheck protection from new and non-bank customers

Independent and struggling? How to choose between unemployment and the paycheck protection program

What You Can Do Now To Maximize Paycheck Protection Loan Forgiveness

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