Minority-Owned Businesses at 'End of the Line' for PPP Loans, Thousands Ignored or Denied

Tens of thousands of minority-owned small businesses across the country were among the last to receive Paycheck Protection Program loans from the federal government's March COVID-19 pandemic relief program—if they were approved at all.

The loan program ran from April 3 to August 8. An analysis of it by the Associated Press published Sunday found that minority business owners—many of them just "hanging on" financially—had their applications and inquiries pushed back to the final few weeks of the program. The AP analyzed ZIP codes from PPP data and found loans were approved at twice the rate in areas with the largest proportions of white residents. The AP detailed how six loans were approved for every 1,000 people living in the 20 percent of ZIP codes that make up the highest percentage of white residents. This trend continued as minority-owned businesses failed to receive approval at nearly half the average rate during the first and second rounds of PPP loans.

The report finds minority business owners were rejected or ignored for PPP loans at much higher-than-average rates during the first two rounds of payouts. But this trend reversed "partly because banks responded to criticism by making it easier to apply for a loan."

The PPP loan program in total gave out 5.2 million individual loans amounting to $525 billion, including millions in payouts to churches and other organizations that pay no taxes. Meanwhile, Black and minority owners were pushed to "the end of the line," according to the AP's analysis.

"Many are hanging on by the skin of their teeth. Most are in the professional services, small retail shops, restaurants, barber shops," said Ramiro Cavazos, president of the U.S. Hispanic Chamber of Commerce, in an interview with the AP.

Despite approving about $349 billion in loans within just two weeks of launching the PPP program, only about a quarter of that money went to economically disadvantaged areas. And even less than that went to Black or Latino business owners.

Leaders of several organizations that promote Black-owned businesses across the U.S. have said countless minority firms approached them during the pandemic to complain that banks were not responding to their applications or general inquiries about the PPP program. One factor for why minority-owned businesses were left out is the program excluded non-employer firms, or businesses with owners but no other staffers.

Thousands of Black, Hispanic and Asian-American business owners simply gave up by the time Congress approved a third round of PPP loans months after the program began.

"Many of our businesses were being turned down in the first and second round of funding. That caused application fatigue and frustration," said Ron Busby, president of the U.S. Black Chambers, a nationwide chamber of commerce, in an interview with the AP.

At a rate more than twice that of white business owners, one-quarter of Black business owners who did not receive PPP or Economic Injury Disaster Loans said their PPP applications were outright denied, an August Small Business Majority survey found. Only 9 percent of both white and Asian business owners reported having their applications rejected. The Detroit Free Press reported in September that only three restaurants that received PPP loans of more than $150,000 were Black in the entire state of Michigan.

The National Community Reinvestment Coalition, a nonprofit based in Washington, D.C., conducted a "mystery shopper" study between April and late May and found white borrowers were given far better treatment and leniency at 13 out of 17 banks.

A New York Federal Reserve report found the number of overall U.S. small business owners plummeted by 22 percent between February and August. But there were massive racial divides on exactly who failed. Black-owned businesses dropped by 41 percent, Latino-owned businesses fell by 32 percent and Asian-owned businesses decreased by one-quarter.

Newsweek reached out to the Small Business Administration as well as the Treasury Department for additional remarks Sunday afternoon.

minority owned businesses ppp loans
Minority-owned businesses were at the "end of the line" for PPP loans, with thousands ignored or denied, according to a new analysis. Here Mas Azemi of Mas Barber Shop closes his shop on August 5. DARRIAN TRAYNOR / Stringer/Getty Images