Calls for ‘prioritized’ funds to help underserved, black-owned businesses

Editor’s note: This is the second in a series of reports from TechWire examining the impact of COVID-19 on minority-owned businesses and efforts to provide relief.

RESEARCH TRIANGLE PARK– The black community is bearing the brunt of the outbreak’s economic fallout, experts say. Lack of resources and access to networks, along with the government’s “first come, first serve” policy, is shutting many of them out of relief loan programs while bigger companies get their pockets lined.

Already, there’s a growing list of big firms like Los Angeles Lakers, Nathan’s Famous Inc., Shake Shack and others, which are returning coronavirus relief loans initially issued by the Small Business Administration (SBA) because of public backlash.

Now, many are calling for more “prioritized” funding to make up for the growing equity gap before it’s too late and funds get dispersed completely.

This month, the US Black Chamber, with 20 other groups, formed a new group, the Page 30 Coalition, urging the SBA to set-aside “returning funds,” which could end up in the billions, for underserved business owners and community development financial institutions (CDFIs). The Center for Responsible Lending, a non-profit group that combats abusive lending practices, is also making similar appeals.

Congress has already authorized $660,000 billion in federal emergency loans, including the most popular the Paycheck Protection Program (PPP). The second round of funding includes $60 billion for minority businesses that struggled to get it the first time around. As of May 12, 2020, the program has dispersed 4.3 million loans totaling nearly $534 billion, according to the SBA.

But the Chamber’s president Ron Busby fears it’s not getting in the right hands.

“[It] was supposed to prioritize our community and similar under-served communities, and we have yet to see prioritization realized. As it stands, black-owned businesses have faced increased challenges as it relates to capital and prioritization on PPP,” he told WRAL TechWire. “Too often aid funding goes to the fastest and savviest, when in fact, those who are hit the hardest — black-owned businesses — deserve to be first in line for aid funding.

On the ground here in the Triangle, Cyril Broderick Jr. is seeing the situation play out firsthand. As president and CEO of the Greater Durham Black Chamber of Commerce (GDBCC), he says some businesses have applied for and received PPP funds, but most are waiting on their applications to be processed.

“The government relief effort has been focused on big businesses, and many black businesses were left out,” he said. “In PPP, the timing restraints, the size of the banks who could lend, and many other variables made it tough for black and small businesses.”

Even before the pandemic hit, a Federal Reserve survey published earlier this year said it found evidence that black-owned firms are less likely than white-owned firms to receive approval for financing, and are more likely to be discouraged from applying for financing.

Cyril Broderick Jr.

No data, call for transparency

The SBA has not shared loan disbursements by race. When contacted by TechWire, a spokesperson said they did not have a demographic breakdown. It did not include “optional standard demographic information for principals” on its PPP loan application form.

The Chamber has asked for demographics, particularly race, to be collected on the loan forgiveness application — “to remedy this mistake” and bring more transparency.

In addition to more funds, the coalition wants to expand the PPP through this December; eliminate “first come, first serve” rule and extend covered period for loan forgiveness.

The effect of the crisis on small businesses has been profound — over half (51.4 percent) of small businesses said the crisis has had a large negative effect on their businesses and 74 percent of small businesses said they have had a decrease in operating revenues, according to the Small Business Pulse Survey.

Temporary closings have impacted 41.4 percent of small businesses, and 11.5 percent of small businesses said they had missed a loan payment since the beginning of the crisis. These impacts were far worse for some hardest hit sectors, including education, food service and accommodations and recreation.

Broderick’s outlook remains “mixed.”

“There are many businesses that are closing down or pausing services. There are some that are changing their products and services to meet the changing needs of their customers and there are some that can survive with their existing business models. We are working hard to support all three kinds of businesses.”

Disproportionately impacted

On a separate front, the COVID-19 outbreak is exacerbating the digital divide — the “have and have nots” of communication technologies — hitting the underserved and minority school districts the hardest.

Those are the latest findings from a new analysis by Raleigh edtech startup LearnPlatform released on Thursday.

Higher-minority districts experienced 121 percent higher equity gap: Districts with 40 percent or higher populations of Black and Hispanic students witnessed dramatic within-district increases in their digital learning equity gap as a result of COVID 19. In these districts, the compounded impact of access and engagement was more than double that of districts with less than 40 percent students of color.