The PPP excludes black and Latino small businesses, so fix it

While the House prepares to revamp the government’s small business aid program, there needs to be a serious reckoning about how this program is driving racial inequality in our country. 

As the leaders of two of the largest racial justice organizations in the country, we previously heard from our communities that the federal government was failing to support our country’s black and Latino entrepreneurs — and now we have the numbers to back it up.  

Our recent survey of 500 black and Latinx business owners and non-profit executives paints a dire picture of inadequate support from federal relief programs like the Paycheck Protection Program and from the financial institutions tasked with doling out the funds. Beyond failing to serve black and Latino small business owners, the government’s distribution of federal relief programs continues a decades-old pattern of policies that grow the racial wealth gap.  

Conducted between April 30 and May 12, the survey found that, if circumstances continue, 45 percent of black and Latinx small businesses anticipate that they will have to shut down permanently within the next six months. Despite 51 percent of surveyed black and Latino small business owners reporting they applied for loans less than $20,000, significantly less than the average $206,000 loan amount, only 12 percent of participants received the full amount of aid they applied for. 

And, even if they were able to receive assistance, it did not come quickly: Forty-five percent who did receive partial or full assistance said that they had to wait for more than two weeks, a potentially disastrous lag.  

This is a dangerous sign for our economy’s path to recovery — entrepreneurship has been, and will be in the aftermath of COVID-19, a driver of wealth and progress in our communities. This is no way to treat people who are showing up to work through the pandemic, saving our country and providing for us while we socially distance or work from home. Undermining their success now not only threatens relief in black and Latino communities, it threatens recovery for us all. 

We wanted to hear the stories behind these statistics, so we convened focus groups that allowed small-business owners to expand on their selections. Their responses elaborate on a government response that offered more red-tape than relief. 

We heard, over and over, that the application process for relief was a barrier in and of itself and a lack of transparency around what the CARES Act actually entailed created confusion among their peers.  

Many of those who were able to apply said that they had to rely on their payroll firms to complete the application, in the absence of having a lawyer on staff. A black small business owner said that calling it a “loan” dissuaded many business owners in her networks from applying, because they did not understand the loans could eventually be forgiven.

Many participants also criticized big banks as being unresponsive and uncaring, sharing that they believed the banks showed preferential treatment to larger clients. A black non-profit executive said she applied for the PPP during the first round, but didn’t get it because of the “whole big bank thing.” 

These small business owners’ stories are not unique, as countless reports have shown.

The bottom line is that the federal government is spending billions of dollars, but our communities aren’t seeing enough of it. What we see is a potential do-over of our worst mistakes following the 2008 financial recession, when big banks received a bailout and our communities were left to dry. What we see is, yet again, a system that doesn’t work for our communities.

In the experience of many of those we spoke with, banks have either denied them important access to capital or charged an arm and a leg for it. One solution is to remove them as the middle-men so business owners in our communities can access the funds  needed to avoid mass layoffs and start rehiring. Instead of loans, small business owners should be offered grants and direct financial assistance in the form of moratoriums on rent and mortgage payments, and stop negative credit reporting, until the end of the crisis. 

This will require investing more resources and more comprehensive legislation such as the Paycheck Recovery Act (PRA) introduced by Rep. Pramila Jayapal (D-Wash). All small businesses would be eligible for the PRA, rather than allowing the banks to choose. It would provide for 100 percent of worker salaries up to $90,000 and necessary costs such as rent, mortgage and health insurance premiums. This kind of universally available relief is what’s needed to save our communities. 

Financial discrimination in the form of segregation, redlining, predatory and subprime loans has historically undermined black and Latino communities’ ability to affordably and safely access capital. Still, we’ve found innovative solutions and fought against discriminatory practices to build businesses and nonprofits that are now the engines of opportunity in our communities. In the midst of a pandemic, this discrimination is threatening to risk all that we have built. 

Democrats depend on black voters and Latinx voters to win, and today, some of the most powerful leaders in our communities — entrepreneurs and non-profit executives — are telling Congressional leadership to push, and push hard, for a relief program that will actually include us. They can start by offering direct assistance and making sure that there is a public accounting of who is getting the money and who is not.

Rashad Robinson is president of Color Of Change, the largest online racial justice organization in the country that designs winning strategies to build power for black communities. Janet Murguía is president and CEO of UnidosUS, formerly the National Council of La Raza, the nation’s largest Latino civil rights and advocacy organization.