Analysis shows Black and Hispanic businesses lagged in access to PPP loans

Katie ArnoldJP In The News

From the Portland Business Journal

Dec 23, 2020, 5:08pm PST Updated: Jan 9, 2021, 9:42am PST

Dean’s Beauty Salon and Barber Shop owner Kimberly Brown couldn’t get a Paycheck Protection Program loan. CATHY CHENEY | ©PORTLAND BUSINESS JOURNAL


Kimberly Brown didn’t get a Paycheck Protection Program loan. She tried. Twice. She even went back and forth with one bank about her application.

Brown is the third-generation owner of Dean’s Beauty Salon and Barber Shop, one of Oregon’s oldest Black-owned businesses.

Her grandparents opened the business in 1956. For three generations, it’s operated two blocks off Martin Luther King Jr. Boulevard in a neighborhood once home to the city of Albina, long the cultural center of Portland’s Black community.

Brown’s inability to access the federal government’s $659 billion relief program for small business isn’t an outlier.

An analysis by Portland Business Journal parent company American City Business Journals of all 5.2 million Paycheck Protection Program loans shows businesses in neighborhoods of color got fewer loans and had delayed access to the program, despite language in the legislation that created the program that mandated priority access for underserved borrowers.

The Business Journals analysis shows 65% of the program’s loan dollars went to majority-white neighborhoods, 5% went to majority-Black neighborhoods and 8%went to majority-Hispanic neighborhoods.

White neighborhoods got money faster. Majority-white neighborhoods got 83% of their loan dollars in the first month of the program, giving businesses in those areas a head start in the scramble to survive the pandemic. Black neighborhoods got 77% of their loan dollars in the program’s first month. Hispanic neighborhoods got 74%.

A separate analysis, done by ComplianceTech at the request of the Portland Business Journal, shows East Portland – the most diverse area in Multnomah County – had the least access to the program.

The above map shows Multnomah County’s census tracts. The shaded tracts had less access to PPP loans than the statewide average, according to the ComplianceTech analysis.

That analysis also shows only 1.1% of the state’s more than $7 billion in PPP loan dollars went to census tracts defined as “distressed” by bank regulators. About 0.5%of Oregon loan dollars went to “remote rural” parts of the state.

ComplianceTech is the developer of LendingPatterns, an online tool used to analyze Home Mortgage Disclosure Act data.

“This was not an equitable distribution of emergency small-business funds,” said Ramiro Cavazos, CEO of the U.S. Hispanic Chamber of Commerce.

American City Business Journals was one of 11 media organizations that sued the Small Business Administration in May for detailed information about the program, including the names and addresses of borrowers.

In early December, the SBA released the information, including dates of loans, amounts and names of lenders, enabling the analysis of where and when the money flowed.

Because the program did not collect complete information about the race or ethnicity of borrowers, the Business Journals determined the census tract for all 5.2 million loans using a geocoding service in order to analyze the demographics of neighborhoods that benefited from the massive relief program.

While many defend the Paycheck Protection Program for the billions of dollars it distributed in a short amount of time, critics say it’s the latest example of the financial system’s painful history of not equitably serving communities of color and proof that even during the racial reckoning in the wake of George Floyd’s death — a moment that sparked multibillion-dollar racial justice commitments by the country’s biggest banks — Black and brown businesses continue to have inferior access to capital.

“At least 95% of the business owners I know — African American — none of them got any money,” Brown said. “Maybe I filled out the paperwork wrong. I can’t imagine all of us did.”

Critics also note ironic comparisons to the nascent Covid vaccine program, which is taking steps to prioritize those most in need, such as health care providers and the elderly. The Paycheck Protection Program took no such steps. The money gushed to affluent areas, then trickled to poor areas and the vulnerable businesses most at risk.

Brown, 60, who considers herself a “child of the Civil Rights Movement,” is frustrated with how the program unfolded. She only asked for $11,000, but the money would have prevented her from falling behind on her mortgage and emptying her personal savings.

“I don’t understand how we’re still at this place where we’re still at the bottom of the barrel when something happens.”

‘It went to people that had more resources’

The Paycheck Protection Program made its first loan on April 3, 2020.

The design of the program was simple: Given the overwhelming need for financial relief, the U.S. Small Business Administration essentially deputized banks. Instead of processing loans at SBA headquarters, banks identified borrowers, processed applications and extended credit.

In the clamor to get money out the door, banks prioritized existing clients.

As one example, within two weeks, Morgan Stanley noted at least $243 million of the program’s initial $349 billion in loans went to public companies that had access to other financing options. (Some of them have since returned the funds.)

“They were the ones that had access to capital elsewhere and didn’t need the loans,” Cavazos said. “They gobbled up all that first round. It went to people that had more resources that were ready and that had relationships and needed no introductions.”

That also meant businesses of color, which have fewer relationships with banks, ended up at the back of the line. Eighty-six percent of white adults are fully banked, according to the Federal Reserve, significantly higher than Black adults (54%) and Hispanic adults (68%).

“It was difficult for most Black people to apply for a PPP loan when they didn’t have a relationship with a bank,” said Ron Busby, CEO of U.S. Black Chambers Inc.

Busby noted the lack of banking relationships stems from the financial industry’s history of racial discrimination.

In October, the Portland Business Journal reported on the 84% decrease in SBA 7(a) loans to Black businesses since the 2008 financial crisis, The report also showed majority-white neighborhoods average roughly twice as much in small-business loans, per capita, as majority-Black neighborhoods.

Because the Paycheck Protection Program offered payroll relief, Busby said it also wasn’t a good fit for many Black businesses.
“The majority of Black firms…are sole employers,” Busby said.

Busby and Cavazos noted businesses of color also tended to seek smaller loans –many around $5,000 – putting them at a disadvantage in the first round when banks rushed to served the biggest customers.

Asiyah Rose – Luxury Candles is one of those businesses. Founder Rosemary Egbe, who also freelances as an accountant, applied for a PPP loan through an online platform. She was asked to re-supply financial documents. She did. But said she still didn’t get a loan.

On a recent rain-soaked Sunday, Egbe staffed a pop-up shop in the Pearl District.

Ironically, while Egbe couldn’t get a PPP loan, customers lined up to buy her products in a census tract that received 461 PPP loans, second in Portland only behind the downtown business core, which received 980.

Although Egbe didn’t get a PPP loan, she said her business continues to grow. She expects to hire her first employee in 2021. She’s also managed to get her products on the shelves of several local stores, including Green Door and Event Cosmetics. She continues selling at various pop-up shops and markets.

“Everyone around me believes in me,” she said. “I’ve been very fortunate.”

Busby said many Black businesses haven’t been as fortunate. He cited a Stanford study that showed 41%, or roughly 441,000 Black businesses, closed by April 18, roughly two weeks after the Paycheck Protection Program started.

Busby said the customers of those business have likely gone elsewhere for services now.

“Not only did you lose those businesses, but you lost that revenue from the communities those businesses supported and served,” he said. “Those dollars will never come back.”

‘Dangling by their fingertips’

The second round of the Paycheck Protection Program opened on April 27. By then, many businesses of color were “dangling by their fingertips,” Cavazos said.

Many had missed mortgage and utility payments. Credit scores had been damaged.

But the second wave of the program offered more help. Unlike the first round, it set aside $60 billion for small lenders and community development financial institutions, or CDFIs.

CDFIs are known for their work with disadvantaged communities.

“They played a huge role (in getting PPP money out),” Busby said. “There was a large percentage of our members that ended up getting funding from CDFIs that couldn’t get funds from traditional banks.”

Galen Gondolfi is a senior loan counselor for St. Louis-based Justine Petersen, a community development financial institution known for its work with communities of color. The organization made 436 PPP loans, for a total of $14.8 million, with 74% of loans going to businesses of color.
Gondofli said the problems with the Paycheck Protection Program reflect “deeper disparities in the financial system, including mortgage and small-business lending.”

“This is a larger conversation than just PPP,” he said.

As the attention to smaller businesses and businesses of color ramped up, the size of the average loan dropped. After averaging nearly $146,000 in April, the average loan in May was just under $52,000. It fell even further in the third month of the program to less than $31,000.

As the program neared its end, online lenders played a bigger role.

In May, the third month of the Paycheck Protection Program, Po’Shines, a soul food restaurant in North Portland, got a nearly $16,000 loan using Square Capital, an online platform that got loans approved through Salt Lake City’s Celtic Bank, which ranked No. 3 in PPP loans between June and August.

“It worked out really well,” said John Tolbert, Po’Shines general manager. “For me, as a Black owner, and speaking maybe for other Black business owners, the hardest part was just getting (the loan) processed and making sure you don’t get overlooked.”

Tolbert also serves as president of the Portland-based Black American Chamber. He said there needs to be safeguards to make sure businesses of color have adequate access to relief efforts.

“There need to be systems in place for the Black community,” he said. “If Black lives really matter, let’s do it right.”

In the wake of not getting a Paycheck Protection Program loan, Brown has had to take extraordinary measures.

She emptied her savings account. She’s behind on her mortgage. She said the electric company has given her some relief.

“I’m still behind on my mortgage payments,” she said. “Luckily, everybody is very forgiving. But come January I’m going to owe that money.”

Brown got some money from the Oregon Cares Fund, which was created with the state’s share of the $2.2 trillion CARES Act, and which benefits Black Oregonians and businesses. But she didn’t have any luck applying for any other relief programs.

“I applied for everything,” she said.

In lieu of more financial relief, she said one of her sons and his wife used their money to clean and paint her shop. Brown felt bad about the gesture because the couple is saving to buy a house.

“He said, ‘Don’t worry, we’ll get through this,'” Brown said. “Luckily, I have two sons who are fantastic and fabulous and have really good jobs and help their mother out. It’s still difficult.'”

‘We found significant differences’

While racial disparities were evident early in the program, by the end of the second round of loans, the dollar distribution began to even out. In the end, white neighborhoods got $340 billion in PPP loans (65% of the total), according to the Business Journals analysis. Black neighborhoods got $24.6 billion (5%). Hispanic neighborhoods got $42 billion (8%).

For context, roughly 65% of Americans live in majority-white census tracts, 7% live in majority-Black census tracts and 11% live in majority-Hispanic census tracts.

Heavily white neighborhoods fared the best. Ninety-percent white neighborhoods got one loan for every 69 people, according to the Business Journal analysis, compared with one for every 104 people in comparable Black neighborhoods and one for every 108 people in Hispanic neighborhoods.

Those same white neighborhoods got roughly two-thirds of their loans approved in the first month of the program, compared with less then one-third for comparable Black neighborhoods and 41% for Hispanic neighborhoods.

A separate analysis of PPP data done by the economic and financial watchdog group the National Reinvestment Coalition found wealthier neighborhoods got money quicker than less affluent areas.

“We found significant differences between low-income tracts and the upper-income tracts,” said senior analyst Bruce Mitchell.

Mitchell said the findings reflect what his organization expected after documenting what it determined was discrimination during the PPP application process. He said the program ultimately didn’t satisfy the language in the legislation about prioritizing disadvantaged borrowers.

“There was…an intention in the language…that it should prioritize underserved and minority areas, and it apparently did not,” Mitchell said.
In the end, Busby said his chamber’s most recent member survey shows about 60% of Black businesses didn’t get a PPP loan and 94% got less than requested. U.S. Black Chambers Inc. represents nearly 100 regional Black chambers of commerce.

The U.S. Hispanic Chamber estimates Hispanic businesses got between $2 billion and$3 billion from the program.

“That’s barely 1%,” Cavazos said.

Cavazos estimates 32% of Hispanic businesses are closed or temporarily shuttered.

“They need capital to either reopen or to start a new business,” he said.

That could arrive soon.

While its future is in doubt after comments from President Donald Trump, the $900 billion relief bill approved by Congress includes another $284 billion for the Paycheck Protection Program, with $15 billion set aside for CDFIs and minority depository institutions, according to a summary provides by U.S. Sen. Ron Wyden’s office.

That sort of targeted approach is critical, Busby said.

“We need to ensure that we are intentional about where this next funding goes,” he said. “We know the communities that were hit the hardest. We need to target those.”

As for Brown, Dean’s Beauty Salon is still open for business.

“I believe that if you put good stuff out in the world, good comes back at you,” she said. “But it is hard and it’s difficult. But I don’t get down because I’m not sick and I’m blessed that my family is well.”


Matthew Kish
Staff Reporter
Portland Business Journal