However, small community banks have stepped up, providing a lifeline for small Black and minority businesses who were struggling. The issue was so prevalent, when Congress added another $284 billion in new funding for the PPP late last year, $12 billion was specifically earmarked for Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs).
That allowed small minority businesses the time and attention they needed. Smaller banks including Carver, United One, and Citizens Savings and Trust, were not only able to help their customers but also gained some new ones as they also helped small business owners with who they did not have a previous relationship with.
Jay Reynolds of WolfCreek Consulting, a Florida-based staffing firm, told Black Enterprise last summer that NDC, a community bank, helped immensely when the pandemic struck.
“I had a couple conversations with NDC and we went through the numbers and they were able in a fairly straight fashion to get that PPP funding, and it came along at a time where it was absolutely necessary,” Reynolds said. “Through NDC and having that conversation with them, [it] helped us through some terrible things happening to the business. I don’t want to say close or lay off people, but I can tell you that they literally made a difference.”
Minority business owners did much better in the second round of funding. During the first round, large businesses such as Shake Shack and the Los Angeles Lakers took funds before being shamed into returning the funds.
In addition to large businesses taking funds from the program, large banks didn’t want to work with small minority business owners, even if they had accounts at the bank. Some banks either ignored their smaller customers or just rejected them from funds due to being suspicious of lending to Black borrowers.
“I’ve heard a lot of stories of customers who were eligible for these funds but didn’t trust that there wouldn’t be some sort of a catch,” Robert James II, who chairs the National Bankers Association told NPR.
On Monday, the Biden administration made targeted changes to the PPP to ensure small businesses get the funding they need.
The changes include shutting out businesses with more than 20 employees for the first two weeks after the program received a new influx of funds.
“When the Paycheck Protection Program was passed, a lot of these mom-and-pop businesses got muscled out of the way by bigger companies that jumped in front of the line,” President Biden said, adding that the new rules are meant to make sure the program “looks out for mom-and-pop businesses even more than it already has.”