A recent survey showed that of the more than 500 Latino small businesses that applied for loans, only 97 received money in the first round of PPP funding.
When Latino and other small minority-owned businesses need a loan, they’re often left turning to non-profit lenders—it’s easier for them to get financing there than at big banks.
And, according to NBC News, it’s no different with the small business loan program the federal government created to help keep businesses afloat and pay their employees during the economic crisis.
The government’s $2 trillion stimulus package included $350 billion for the Payment Protection Program, which promises loan forgiveness if a business owner retains or rehires all the workers they had in late February. Almost all of that money was doled out to the nation’s largest lenders, who then appeared to prioritize their more established customers—those who don’t serve the same marginalized, underbanked groups that community lenders traditionally do.
To replenish funding for the PPP (which was exhausted in 13 days) Congress passed a second relief package last week for $484 billion, setting aside $30 billion for community lenders.
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Just like the initial PPP funding, most of that money will go to larger, wealthier, and less diverse businesses: Small lenders have to share that $30 billion with small banks owning assets of $10 billion or less, which is basically 95% of the nation’s banks.
In a survey conducted by The League of United Latin American Citizens and the U.S. Hispanic Chamber of Commerce, data showed that of the more than 500 Latino small businesses that applied for loans, only 97 received money in the first round of PPP funding.
“It’s this type of dealing that perpetuates the racial wealth gap and breeds public resentment and distrust,” Center for Responsible Lending (CRL) Federal Advocacy Director Ashley Harrington said in a statement.
According to CalMatters, Latino-owned businesses contribute about $500 billion to the U.S. economy in annual sales and employ more than 3 million people.
Harrington is urging the House and Senate to introduce a new bill that specifically ensures relief for minorities. “Business owners of color, including immigrant business owners and workers who use Individual Taxpayer Identification Numbers to pay their taxes, employ more than 8.7 million Americans and generate more than $1.38 trillion dollars to the overall economy… We can’t afford to leave these businesses out in the cold.”
Earlier this month, Rep. Joaquín Castro, D-Texas, chairman of the Congressional Hispanic Caucus, wrote a letter to Secretary of the Treasury Steven Mnuchin asking that “substantial funding is channeled through community development institutions (CDFIs)” and that they be provided a $65 billion set-aside.
“These institutions play a leading role in serving farmers, as well as veteran, family, women, and minority owned small businesses in rural, urban and suburban communities,” the letter reads.
A week ago, Texas Gov. Greg Abbott and Goldman Sachs announced it would loan $50 million to CDFIs in Texas to assist with PPP loans for small businesses. Half of the money went to LiftFund, a CDFI based in San Antonio. “We received more than $1 billion in requests, for which we only have $30 million to invest,” Janie Barrera, LiftFund president and CEO told NBC News. She added that 46% of the applications for coronavirus relief funds were from Latinos.
LiftFund told NBC that before the coronavirus crisis, it loaned about $25 million to $30 million a year, with the average loan being about $24,000. About 82% of their borrowers are minority business owners.
“I think this shows the deep need and it’s a wakeup call to our community that more needs to be done,” she said.