Black-owned firms hope this spherical of PPP will not fail them

Adrienne Parker, who owns a consulting firm, has applied for a second round of PPP.

Source: Adrienne Parker

Adrienne Parker knows what it is like to struggle as a black small business owner during the pandemic.

Parker, the sole owner of Peace of Mind Consulting, an Atlanta management and accounting consultancy firm, saw much of her income run dry as clients faced their own financial hardships.

When the first round of Paycheck Protection Program loans became available, it went to a community development financial institution (CDFI) in Atlanta, ACE instead of a major bank.

“I’ve heard the horror stories and witnessed the horror stories firsthand, the experiences with the big banks,” said Parker, 37.

While she eventually got a $ 9,000 loan, one of her clients going through a major facility waited months to find out they had been declined.

“Before the pandemic, there were already differences in loan approvals for black entrepreneurs compared to white business owners,” said John Holdsclaw IV, chairman of the CDFI coalition.

“Despite the PPP program, the pandemic has only widened the gap.”

More from Invest in You:
Here is a 12 month roadmap to financial wellbeing
Black Hispanic Americans pay twice as much bank fees as whites: survey
Biden pledges to help resolve America’s childcare crisis. Here is his plan

CDFIs have long played a role in underserved communities. These are credit unions, banks, microcredit funds, or venture capitalists that provide low-income communities with access to financial services. Their communities may trust them more than large financial institutions.

CDFIs are also among those with early access to the latest round of PPP loans. When the program reopened on Jan. 11, community financial institutions working with underserved communities were at the fore. The following week it was opened to more lenders. More than 60,000 loans were approved in that first week.

Parker is among those who applied for another loan. Others are first-time applicants.

“This next round is huge for black and brown entrepreneurs and entrepreneurs,” said Holdsclaw.

This round is just a deposit for 2021 in my opinion.

John Holdsclaw IV

CDFI coalition

There is no exact data on the racist breakdown of PPP loans as demographics in the applications are purely voluntary. About 75% of all PPP loans had no information at the time of application, according to the SBA.

However, PPP data analyzed by The Associated Press showed that many minority owners did not get loans until the final weeks of the program, which ended Aug. 8.

The analysis found that six loans were approved for every 1,000 people living in 20% of the postcodes with the largest proportion of white residents. That was almost twice as much as for those who live in 20% of the postcodes with the lowest percentage of whites.

The relief is urgently needed. In a September survey by Goldman Sachs, 43% of black small business owners said they will run out of cash by the end of 2020.

David Reiling, CEO of Minneapolis-based CDFI Sunrise Banks, is encouraged by the response to this latest round of PPP loans. The extra lead time allowed his bank to reach the public and help underserved business owners steer the process.

Of the 2,500 applications received so far, 1,700 are complete. Of these, 800 are first-time PPP borrowers with an average loan volume of around $ 30,000. About 45% are from low- and middle-income communities, 25% are African American, 10% are Asian, and about 25% did not disclose their race.

However, more is needed to help these businesses survive.

“In some cases, a small grant may be a more efficient and effective way to support these small businesses,” said Reiling.

“You need a little bit of equity to get through Covid.”

Holdsclaw hopes the SBA will continue to go to CDFIs and other organizations to reach out to minority communities.

“This round is just a down payment for 2021 in my opinion,” he said.

SIGN IN: Money 101 is an 8-week financial freedom learning course delivered to your inbox weekly.

CHECK OUT: A year after starting my side business, it was making $ 10,000 a month: Here’s what I learned about Grow with acorns + CNBC.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

Comments are closed.