Jul 31, 2020 - Economy

PPP was not distributed equally across racial lines

Illustration of a giant pipe with a few bills coming out.

Illustration: Aïda Amer/Axios

There's more evidence that the government’s flagship small business loan program was distributed unequally across racial lines.

Why it matters: Minority-owned companies are faring much worse — and the fate of their businesses is much more bleak — than white-owned ones, as the pandemic slams Main Street.

What's happening: Congressional districts with the highest Black populations cinched $13 billion less in Paycheck Protection Program (PPP) funds than districts with smaller Black populations, according to a new study by Accountable.US, an advocacy group, first reported by Reuters.

  • By the numbers: The 10 congressional districts with the lowest Black population received over 64,000 more PPP loans than the 10 districts that have the highest Black population.

A separate analysis of Small Business Administration data released by Bloomberg yesterday shows that the first tranche of PPP funds went overwhelmingly to the whitest parts of the country in its first two weeks, "leaving firms in mostly Hispanic and Black areas to wait until a second tranche of funds was made available."

  • Roughly 27% of small businesses in majority white neighborhoods got PPP loans within that timeframe, but only 17% of small businesses in predominantly minority districts got the funds.
  • Bloomberg found that the second round of PPP funds had more comparable lending in districts.

Between the lines: Time was of the essence for cash-strapped small businesses that in some cases saw revenues come to a standstill when the pandemic hit. A lag in receiving support "could have contributed to layoffs or closures of businesses in minority neighborhoods," Bloomberg points out.

  • Of note: The government set aside $10 billion in the second round of PPP funds to be lent by Community Development Financial Institutions, which specialize in lending in rural, minority and other underserved communities.

The bottom line: The trove of PPP loan data released earlier this summer doesn't give a clear picture of how many Black-owned businesses received loans. The "race/ethnicity" column for businesses was more often than not blank. (And there were errors in the database, anyway.)

  • But other data continue to show piles of evidence that inequality in the PPP loan process disadvantaged Black-owned businesses.
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