During the first round of covid-19 stimulus relief for businesses, many Black companies got shut out of the Small Business Administration’s Paycheck Protection Program (PPP) loans. This time around, Black organizations want a guarantee that the government will give Black businesses specific and targeted covid-19 relief as opposed to a broader scope of minority- or people of color-owned (POC) businesses.
Most would agree that the PPP rollout in 2020 under the CARES Act was botched. The PPP offered up to $10 million per loan, supposedly for small businesses, but funds ran out after many big businesses received funding from banks with whom they had pre-existing relationships. Meanwhile, mom-and-pop businesses were left out in the cold. The problem was magnified for Black-owned small businesses.
Just 20 percent of PPP loans went to areas that had the highest concentration of Black-owned businesses, CNBC reported.
An analysis by the Federal Reserve released in August 2020 raised questions about the racial disparities in bank relationships prior to covid-19 — “structural questions about the presence of banks and access to credit in communities of color, questions that have heightened significance when banks are relied on to administer federal, taxpayer-supported relief programs, as is the case with PPP.”
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Civil rights activists and business leaders have reached out to President Joe Biden’s administration asking that it include targeted funding for Black-owned businesses. Without federal aid, they said many Black-owned businesses could close within the next 90 days.
Members of the National Urban League and the U.S. Black Chambers, among the groups, want Biden’s $1.9 trillion stimulus plan to allocate money that will exclusively go to Black business owners.
“It should be specific,” said Ron Busby, president and CEO of U.S. Black Chambers, in a CNN report. “It should not be a minority, it should not be underserved, it should be Black.”
Black-owned businesses closed at disproportionate rates in 2020 after entrepreneurs said they were rejected by banks for PPP loans and overlooked in the first two rounds of PPP funding. The number of Black businesses fell by 41 percent between February and April of 2020, according to the New York Federal Reserve. By comparison, the number of white businesses dropped by 17 percent.
Black Chamber of Commerce leaders, including Busby, attended a recent virtual roundtable with Vice President Kamala Harris and Treasury Secretary Janet Yellen to discuss how the administration planned to help Black businesses devastated by covid-19.
During the discussion, Harris and Yellen both agreed that little PPP funding was allocated to Black businesses under former President Donald Trump’s administration, CNN reported. According to Yellen, Biden’s administration would designate $15 billion in “equitably distributed grants” to more than 1 million of the hardest-hit small businesses.
“This pandemic has exacerbated all the problems that existed before,” Yellen said, noting the systemic racism and financial hurdles faced exclusively by Black businesses.
However Harris and Yellen, although asked repeatedly, could not say the Biden stimulus package would include exclusive funding for Black businesses. They stressed that there would be targeted aid for all minority and women-led businesses.
Meanwhile, a bipartisan proposal by Senators Steve Daines (R-Mont.) and Cory Booker (D-N.J.) aims to give $50 billion in grants for the smallest businesses and nonprofits.
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Also, Senate Small Business Chairman Marco Rubio (R-Fla.) has circulated plans to target long-term loans for businesses that make most of their money in low-income communities and to set aside $25 billion for those with 10 or fewer employees, Politico reported.
“We got off to a bad start for the underserved communities,” said Sen. Ben Cardin of Maryland, the top Democrat on the Senate Small Business Committee, according to Politico.