The Paycheck Protection Program was designed to help businesses struggling during these incredibly uncertain times. As long as the business met the eligibility criteria then they could apply for and hopefully receive a government-backed loan which could ultimately turn into a grant they would not have to pay back. The problem, however, is that many minority-owned businesses found several roadblocks to such funding. Surveys conducted by 2 separate equal rights groups suggest that minority-owned businesses were by and large neglected when it came to PPP funds. As a result, almost half of the business owners surveyed say they expect that they will eventually have to close for good.
It seems to be the case that black and Latino owned businesses had a much more difficult time when it came to the PPP process in general. And this is why so many are fearing the worst: permanent closure. So why is this? Why has it been harder as recent surveys show for these minority-owned businesses to gain access to much-needed funds during this crisis?
The surveys conducted included a variety of interviews, spanning 500 small business owners as well as 1200 employees. The interviews were done between April 30 and May 18. According to what the data shows, a mere 12 percent of those owners who applied for SBA backed loans—the majority through the PPP—got the amount they requested. Meanwhile, just over 25 percent of those asked said that they received money but it was only a small fraction of the amount they'd applied for. In the end, fifty percent of those interviewed said that yes, they do foresee having to close their doors sometime within the next six months or so.
The president of Color of Change, one of the organizations conducting the interviews, explained that given the results of this recent survey, it is fairly evident that policies need to be put into place now to help protect minority businesses, otherwise we could very well be looking at a major loss in terms of a generation of black and Latino owned companies. Such will inevitably hit the country's economy pretty hard.
The amount applied for on average--among those surveyed--was less than fifty thousand. Also, fifty percent of those who participated did say that they had to lay off some of their employees amid this crisis and beyond.
Many pinpoint the problem as stemming from the weak relationships that minority business owners have with banks. This of course makes it difficult for these businesses to access the government-backed aid programs. There was the fact too that many banks only looked at loan applications from their existing customers. Some even went so far as to turn away applicants who had credit cards through other lenders. And for some black and Latino owners, this was the first time they'd ever truly looked into a business loan. Equal rights proponents are demanding more proactive measures on the government's behalf as far as ensuring equal access to the PPP. If nothing is done, then sadly, many smaller minority businesses could very well fall victim to the post-pandemic environment.
First Union Lending is here to help. We regularly work with minority-owned businesses across numerous states. We want to see your company make it through this and move toward success. Call today to see how we can help you gain access to much-needed PPP funds.