Changes in PPP eligibility give minority business owners who have been ignored a new chance for loans
Businesses across the country were forced to shut down in March 2020 as statewide closures took effect. The announcement of financial support for business owners through the Paycheck Protection Program was therefore a relief.
But instead of getting help, many small minority-owned businesses have been denied PPP loans.
“A lot of people have just been turned down for loans,” said Shanté Williams, president of the Charlotte Mecklenburg Black Chamber of Commerce. “Even if they could show they were in pain. They could show off what they were making before 2020, and that just wasn’t enough. “
According to The data from the Small Business Administration, of the 14% of recipients who self-reported their race, less than 2% of black-owned businesses, and only 7% of Latino-owned businesses that applied received P3 funding. This is compared to 83% of white-owned businesses.
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Williams says the lack of a banking relationship between black and Latino business owners and the size of their businesses have contributed to this disparity. She says most black and Latino-owned businesses have fewer than 10 employees, if at all.
Last Monday, in a bid to make PPP funds more accessible to small businesses and minority-owned businesses, President Joe Biden announcement changes to the second round of PPP applications, which began on January 13 and continues through March.
“When the paycheck protection program was passed,” Biden said at a press conference, “a lot of these family businesses were just sidelined by bigger companies that jumped in front of the line.”
According to the White House, 98% of small businesses in the United States have 20 or fewer employees. President Biden has therefore set up an exclusive two-week window for companies with 20 or fewer employees to apply for PPP loans. The priority period began on Wednesday and ends on March 10.
“American small businesses are hurting and hurting badly, and they need help now,” Biden said in his remarks. “And it’s in the best interests of all of us to make sure they get help now.”
In addition to the 14 day priority period, the Small Business Administration will provide a new formula for calculating loans for sole proprietors. At present, loans to these types of businesses are calculated based on their bottom line. Now the SBA will come up with a new formula to make them eligible for larger loans, which are canceled if business owners follow the guidelines. guidelines.
SBA guidelines for non-citizen business owners who are residents of the United States will be clarified. Previously, unclear information led some US residents to be denied access to PPP.
There are also no longer restrictions on business owners delinquent on student loans or who have felony convictions unrelated to fraud. This is especially important for minorities as the criminal justice system disproportionately affects blacks and Latinos. Blacks and Latinos are also more likely to be in default. student loans, preventing them from obtaining business loans.
These changes have been welcomed by local experts who support minority-owned small businesses, such as Charlotte Latin American Chamber of Commerce president Gris Bailey.
“I think it’s a step forward, but I think the first thing our community wants to hear is that they’re included,” Bailey said. “And I think removing some of those barriers will include them.”
But with the optimism surrounding this announcement comes some confusion and concern. Although Biden has announced several changes, they don’t all take effect at the same time.
Apart from the two-week priority period, which began on Wednesday, changes in eligibility and the new calculation formula for certain loans will not take effect until first week Of March.
This causes frustration among people who help small business owners prepare to apply, like Rochelle Sparko, director of North Carolina policy at the Center for Responsible Lending. She says it could end up hurting the companies the changes are meant to help.
In reality, she says, there isn’t really a two-week window dedicated to smaller businesses. Rather 7 to 9 days.
“The opening of the two-week window does not match the rule changes which are in some way designed to benefit businesses owned by people of color,” Sparko said.
So far, the SBA has not clarified whether the new rules will apply to companies that submitted their application before the changes come into effect. That’s why some experts say business owners who fall into these categories may want to wait until next week to apply.
“If they can wait a few days, at least until the end of the week, all of their lending institutions will receive a new formula, which will hopefully be calculated using gross income instead of gross net income.” said Janelly Rosales, business development consultant at Prospera, a nonprofit that supports Latino entrepreneurs.
But while the changes don’t all take effect at once, the Charlotte organizations that support minority-owned businesses say business owners should seek professional advice when taking advantage of the new PPP program changes.
“We are the organizations on the ground. We are the ones who specialize in these specific subgroups and minorities. And so it’s important for them to know that there is help, ”said Jose Alvarez, vice president of Prospera North Carolina. “It’s reliable. It’s confidential. So the first thing they need to look for is help.
This story is part of a collaborative series examining the economic impact of Covid-19 on black and Latino communities. The series is produced through a collaboration between WFAE, Charlotte Ledger, QCity Metro and La Noticia. It is supported by funds from Facebook, the NC Local News Lab Fund, Google and members of the WFAE.
More stories from this series
Maria Ramirez Uribe is part of a team covering the economic impact of the coronavirus pandemic on black and Latino communities.
Gracyn Doctor is a reporter for the WFAE. She graduated from Johnson C. Smith University in Charlotte and Syracuse University in New York City, where she interned for WAER Public Radio. Gracyn also hosted and edited a podcast with ESPN’s Maria Taylor, and developed the Talkin ‘Black podcast.