Minority businesses fear being left out of payday loan program
(Reuters) – As the government grants a second round of aid to small business owners, some U.S. senators, community banking groups and minority-owned banks have said they fear businesses owned by people of color may not fail to receive much needed loans.
The Small Business Administration (SBA) on Monday reopened its Paycheck Protection Program (PPP) for up to $ 310 billion in loans to businesses affected by the coronavirus pandemic. But with many lenders having a backlog of applications, the money could run out in a matter of days – which is not good news for black and Hispanic-owned businesses who couldn’t get loans first. time.
“If the system is a first come, first served system, it will be very difficult for the little ones to get into it,” said Lisa Mensah, president and CEO of Opportunity Finance Network, a national association of financial institutions. community development. .
Small businesses, especially those owned by black and Hispanic entrepreneurs, often lack traditional banking relationships, which could make it more difficult for them to access loans under the program.
According to a survey, only 32% of small businesses with fewer than 500 employees owned by Hispanics and 23% of those owned by non-Hispanic blacks had received a bank loan in the past five years. here released by the New York Federal Reserve earlier this month.
Shortly after the program launched on Monday, some community lenders reported having problems submitting their loans. The “E-Tran” application processing website crashed within minutes of launching after experiencing high volume.
The $ 30 billion in funds earmarked for small lenders with less than $ 10 billion in assets were depleted on Tuesday afternoon, forcing small lenders who failed to compete with large firms for loans.
Mensah’s group was part of a coalition of community banking groups that sent a letter over the weekend to the Treasury Department and the Small Business Administration asking them to set aside $ 10 billion specifically for financial institutions development institutions (CDFI) and minority deposit-taking institutions, which are more likely to lend in various regions and in those with high concentrations of low- and middle-income residents.
Senate Democrats, including Mark Warner and Chuck Schumer, sent a letter with a similar request.
The SBA has said unprecedented demand has slowed E-Tran’s response times and is working around the clock to help all small businesses. Treasury Secretary Steve Mnuchin said many issues were corrected on Tuesday.
Entrepreneurs who have never taken out business loans before may need more help with the application process, putting them at a disadvantage for a program that requires speed, said Joe Neri, Managing Director of IFF , a CDFI that focuses on non-profit organizations.
Eliuth Guzman attempted to secure a PPP loan for his Latin restaurant business in Chicago through his bank earlier this month, but was turned down because his application did not include all the required documents.
For this round of funding, she prepared her application with advice from Accion, a CDFI in Chicago. As of Tuesday afternoon, Guzman was still waiting to hear about his request for $ 20,000, to cover the wages of his five employees and the rent of the commercial kitchen in which they cook.
“We need this loan, we need this cash flow,” said Guzman, whose sales have gone from around 600 lunches a week to around 100 a week during the pandemic. “Having this help from the government can hold me back until I fully recover in the business.”
Report by Jonnelle Marte. Editing by Heather Timmons and Lincoln Feast.