As the White House and various governors push for a national reopening of businesses, many women and small business owners of color who applied for COVID-19 relief funds through the Small Business Administration’s Paycheck Protection Program (PPP) will not be able to do so because they either didn’t qualify or the funds were already depleted by the time they applied, CBS News reports. This financial lockout has some advocacy groups concerned.
“Based on how the program is structured, we estimate that upwards of 90 percent of businesses owned by people of color have been, or will likely be, shut out of the Paycheck Protection Program,” Ashley Harrington, director of the Center for Responsible Lending (CRL), told CBS. In fact, CRL sounded the alarm in an April 6 brief where they foreshadowed that the PPP “will provide no benefit at all” to three quarters or more of businesses run by people of color.
To make matters worse, according to CRL, banks are prioritizing loans to businesses that have substantial payrolls and large loan applications, which puts many small businesses at a disadvantage. According to an April 14 report from the Brookings Institution, businesses owned by women and entrepreneurs of color have 30 percent fewer staff and 40 percent fewer sales on average than those that are led by men or White owners. As a result, advocates argue that the PPP, by design, was founded on an unbalanced playing field.
“In order to achieve scale and rapidity, they did it through lenders, and lenders rationally said, ‘We’ll start with our existing customers first because we have all of their info,’ and those tended to be larger small businesses,” said Joseph Parilla, a fellow at the Metropolitan Policy Program at Brookings. “It stands to reason that the way the PPP was structured, approved loans tended to skew toward White-owned small businesses.”