LOS ANGELES, May 6, 2020 /PRNewswire/ -- A recent review by the Center for Responsible Lending has found that small businesses of color are being excluded from the Coronavirus Aid, Relief, and Economic Security (CARE) Act's Paycheck Protection Program (PPP) and in the absence of specific reforms this practice is likely to continue. The relief program passed by a bipartisan Congress and signed by the President can only be accessed through banks and other existing Small Business Administration (SBA) lenders.
The PPP is a first-come, first-served program, leaving those without existing bank relationships or lines of business credit at a major disadvantage. Minority owned businesses are less likely to be approved for a loan, and when they are approved, it is often for smaller amounts with higher interest rates than those offered to similarly situated white borrowers.
Latino American owned businesses already are bearing some of the harshest impacts of the COVID-19 crisis, with higher levels of job loss, illness, and losses of life. Those impacts are also being felt by other minority owned businesses as available funds in the initial CARE Act were exhausted in the first few days. The CARE Act originally allocated $350 billion to the Small Business Administration to issue loans of up to $10 million per business. In addition, the Cares Act also provided $10 billion for emergency grants of up to $10,000 for small businesses to cover operating expenses. These loans become grants if the businesses keep employees on the payroll through June.
The Center's review found that 95% Blacks, 91% Latinos 91% Pacific Islander 75% Asian small businesses have all been excluded from the SBA's Paycheck Protection Program.
"Congress authorized the Paycheck Protection Program to provide financial support and stability to small businesses affected by the COVID-19 pandemic," said Gil Vasquez, Board Chair of the Los Angeles Latino Chamber of Commerce. "Yet we continue to hear from Latino owned businesses that they face structural barriers to acquiring these loans. We at the Latino Chamber of Commerce are appalled at this practice and demand this pattern for exclusion cease immediately."
"This Covid-19 pandemic has shown that as a nation we have a moral imperative to distribute resources based on racial equity," Vasquez continued. "If we really want a solid recovery in the short and long term, current and future spending bills must address the needs that still exist in the Latino and other communities. When the most vulnerable communities are economically healthy, then all communities are better off."
The Los Angeles Latino Chamber of Commerce demands that the Small Business Administration and Department of Treasury modify the program's policy to reassert the requirement for financial institutions to adhere to fair lending protections and report on applicant demographics. The Latino Chamber is also advocating for the Small Business Administration (SBA) to track the rate of applications and acceptance for small, minority-owned businesses which is critical because without stringent reporting, the SBA can neither confirm racial disparities nor correct any exclusionary lending practices under the Paycheck Protection Program.
Businesses of all sizes owned by people of color, including sole proprietorships, accounted for 30% of all U.S. businesses, contributing 7.2 million jobs and $1.38 trillion in revenue to the economy in 2012. And the sector is growing rapidly. By 2016, there were over 1.1 million employer businesses owned by people of color, accounting for 8.7 million jobs, $280 billion in payroll, and $1.3 trillion in total annual receipts—and this is on top of millions of sole proprietorships. Between 2014 and 2016, businesses owned by minorities grew 13% compared to just a 1% increase in white-owned employer businesses. These same minority owned businesses which contributed significantly to the nation's growing economy prior to the pandemic are now bearing the harshest impacts of the COVID-19 crisis.
NOTE: Media Outlets can clink on this link to access graphics illustrations of projections of the estimated percentage of minority owned businesses likely to be denied by a mainstream bank. https://www.dropbox.com/sh/spuz61y3v9eed3e/AAB4WL8P1cYX98f5qfruqGLXa?dl=0
About the Los Angeles Latino Chamber of Commerce
Since 2009, the Los Angeles Latino Chamber of Commerce (LALCC) has advocated for and promoted the economic development of Greater Los Angeles' Latino-owned businesses, which now number more than 300,000. The chamber's economic development services include procurement, access to capital, certification, technical and other business assistance. Among other issues, its policy and advocacy efforts are focused on public and private minority procurement, community reinvestment and development, Latino public policy, international trade, and small business funding. LALCC is a 501(c)(3) and 501(c)(6) nonprofit organization. For additional information about the chamber, visit lalcc.org.
Contact: Robert Alaniz
Milagro Strategy Group
SOURCE Los Angeles Latino Chamber of Commerce