- The challenges minority- and women-owned business enterprises (MWBEs) face accessing Paycheck Protection Program (PPP) loans during the pandemic was a topic during a U.S. House of Representatives virtual hearing July 9. "I have heard from many minority-owned businesses who did everything right yet they did not get a loan number or loan in the first round," House Financial Services Subcommittee on Diversity and Inclusion Chair Joyce Beatty (D-Ohio) said.
- "Small businesses are critical to the United States' economic growth," Beatty said. "They contribute 65% of all new jobs, and they are a critical tool for wealth creation and increasing employment." But the historical challenges MWBEs face include lack of access to capital and systemic racism, which has "led to their closure at a disproportionate rate during the COVID-19 pandemic," Beatty said.
- MWBEs are critical components of the nation's economy providing "1 trillion dollars in annual receipts" and "nearly 9 million jobs," Ron Busby Sr., president and CEO of the U.S. Black Chambers, Inc., said. Busby and Carmen Castillo, chairwoman of the board of directors, U.S. Hispanic Chamber of Commerce, think there is a policy solution to supporting Black and Hispanic-owned businesses. Congress should prioritize MWBEs, Castillo said. "If we fail to support our businesses, our economy will shrink by billions," she said. The hearing also discussed legislative proposals to counter challenges faced by MWBEs such as H.R.6403 — New Business Preservation Act by Rep. Dean Phillips (D-MN).
Research has shown that small businesses are significant drivers of U.S. economic growth, but due to the pandemic they are diminishing, rapidly, especially MWBEs.
"The number of active business owners in the United States plunged from 15 million to 11.7 million over the crucial two-month window from February to April 2020," according to a National Bureau of Economic Research (NBER) June 2020 report. In comparison to the Great recession, the number of business owners decreased by 730,000, which is only a 5% reduction, the report stated.
From February to April, 41% of Black-owned businesses; 32% of Latino-owned businesses; and 26% of Asian owned-businesses were forced to close, compared to 17% of white-owned businesses, researchers found. The number of women-owned businesses declined by 25%.
"The disproportionate losses in April 2020 to the number of female business owners will only further increase gender inequality in business ownership and perhaps broader economic inequality," researchers wrote in the report.
The NBER report pointed to the PPP, a part of the Coronavirus Aid, Relief and Economic Security Act, as part of the government response to help small businesses with payroll. The program is administered by the Small Business Administration (SBA) in coordination with the Treasury Department. But, there has been controversy in the distribution of PPP loans by major banks.
"Well-connected, wealthier companies," received preference from banks, which failed "to provide benefits to the vast majority of businesses owned by people of color," the Center for Responsible Lending, a nonprofit organization, said in an April 16 statement. However, after public outcry, many national companies, including Ruth's Hospitality Group, sandwich chain Potbelly and Shack Shack, have returned or canceled more than $30 billion in PPP funds, according to CNBC.
The "Paycheck Protection Program and Health Care Enhancement Act," was signed into law April 24 to increase PPP funds. However, a low percentage of Black and Latino business owners who filed loans have received their requested financial relief, according to research by Global Strategy Group for Unidos and Color of Change, nonprofit civil rights advocacy groups. Less than a quarter (12%) of Black and Latino business owners received the amount they applied for, according to the May 18 report. And less than 26% said they received a portion of what they had requested to maintain operations.
Amid concerns about MWBEs being unable to get PPP loans, the Health Care Enhancement Act allotted $60 billion for minority depository institutions, community development financial institutions (CDFIs), and other community lenders to provide assistance to MWBEs, according to the Subcommittee on Diversity and Inclusion. The SBA and Treasury Department announced a further $10 billion set aside solely for CDFIs, and released a shorter version of the loan-forgiveness application form for certain borrowers.
"While Treasury and SBA announced some transparency measures that will include large recipients of PPP, and some demographic information, there remain concerns," the subcommittee said in a statement.
The original deadline for small businesses to apply for a PPP loan was June 30. A bill signed into law by Trump July 4 extended the loan application deadline Aug. 8.