Thousands of minority-owned businesses that were stiffed during the first round of the Paycheck Protection Program (PPP) are hoping this time will be different.
Black-, Hispanic-, and Asian-owned businesses found it hard getting funds from the first round of the PPP. For starters, many big banks were not ready for the rollout. When they were finally prepared, many of these banks ignored smaller customers and instead secured funds for their largest clients.
Additionally, many large companies pillaged the PPP. Large restaurants like Shake Shack and Ruth’s Chris Steakhouse took money from the PPP and were shamed into giving it back. Even the Los Angeles Lakers, an NBA franchise valued at more than $4 billion, took PPP funds.
While they were taking money, minority-owned businesses struggled to get funds. Many minority-owned businesses had to go to smaller banks, community development financial institutions (CDFIs), and minority-serving institutions (MSIs) to get money to pay bills and employees.
A study by the Federal Reserve Bank of New York showed 41% of Black-owned businesses, 32% of Latino businesses, and 26% of Asian businesses shut down between February and April. Just 17% of White businesses closed during the same time.
This time around, the PPP will have some rules, making it easier for the money to go where it’s supposed to go. The program will prioritize applications from CDFIs and MSIs during the first days of reopening to ensure small businesses get the first crack at funds. Businesses with fewer than 300 employees that can show a 25% or larger loss will also be prioritized in this round.
Several large banks, including Wells Fargo, Citi and JPMorgan Chase, have also made financial commitments to help minority- and female-owned businesses during the pandemic and close the racial wealth gap.