by Charlene Crowell
NNPA News Contributor
The $349 billion program created to assist America’s small businesses was launched on April 3 to provide payroll, utilities, rent and more for eligible applicants screened by the U.S. Small Business Administration (SBA). On April 16 – less than two weeks later — this national stimulus enacted in the throes of the COVID-19 pandemic, ran out of funds. Then, in a separate, but related action, federal lawsuits were filed, challenging the lack of equitable access to the program.
On April 19, four class action lawsuits challenged banks’ use of PPP funds. Filed separately in the U.S. District Court’s Central California office, the lawsuits are against Bank of America, JP Morgan Chase, U.S. Bank and Wells Fargo.
While this legal process unfolds, the Center for Responsible Lending (CRL) estimated that as many as 95 percent Black-owned businesses stood no chance of securing a program loan. Other communities of color were similarly likely to be shut out as well: 91 percent of both Latino-owned and Native Hawaiian or Pacific Islander-owned businesses were financially shortchanged.
“The Great Recession drained communities of color of a trillion dollars of wealth that they have yet to recover,” said Mike Calhoun, CRL President. “They should not be excluded from one of the largest COVID-19 relief programs. We cannot allow that to happen again.”
Businesses of color together are responsible for employing 8.7 million people and represent 30 percent of all U.S. businesses. Additionally, the combined contributions that these businesses make to the national economy is a noteworthy $1.38 trillion.
It is also important to note that Black-owned businesses, as a whole, are the second largest employer of Black people in the nation–outpaced in their hiring of Black people only by government.
On April 21, the Senate approved an additional $310 billion for the Paycheck Protection Program (PPP); and on April 23, the House of Representatives also approved the legislation, which is part of the $484 billion stimulus package that also included resources for hospitals and increased testing.
This bill will send a total of $60 million of PPP money to small and medium sized financial insititutions in an effort to reach more Black and minority owned businesses. About $30 billion will go to community development financial institutions (CDFIs), community-based lenders, minority depository institutions (MDIs), small banks, and small credit unions. Another $30 billion will be directed to mid-sized banks and credit unions.
“This funding will address concerns that the previous round of PPP funding didn’t reach enough small businesses and provide relief for those without established banking relationships who have had difficulty accessing the program,” said U.S. Rep. Cedric Richmond, in a statement about the bill’s passage.
Even so, some reactions to the new funding suggested that it was still too little and needs to better address how Black and other businesses of color can fully participate.
“This bill distributes most of the funding again to large banks that prioritized wealthier businesses over small ones,” said Ashley Harrington, Federal Advocacy Director with the Center for Responsible Lending (CRL). “Businesses of color were locked out of round one of the SBA PPP, and this (bill) fails to assure that they will have fair access to the new $60 billion small business appropriation. Nor does it ensure equity and transparency by requiring data tracking on borrower demographics and loan amounts to be collected or reported.”
PPP was a federal response that was supposed to supply funds through June 30 to small businesses and nonprofit organizations. It was created as part of a $2 trillion, national rescue plan authorized through the CARES Act. For six months, loan payments would be suspended and under specific and verifiable conditions, the loans also could be completely forgiven.