The U.S. Small Business Administration launched a third wave of its Paycheck Protection Program forgivable-loan initiative, starting with a three-day exclusive outreach through U.S. Treasury-certified Community Development Financial Institutions that chiefly aid minority-owned businesses.
The first two rounds of the program were criticized for disproportionately favoring larger, white-owned businesses. But the new round, which began Monday and will distribute up to $284 billion to U.S. businesses, will see applications through Wednesday from businesses that typically lack traditional relationships with banks.
“We appreciate the SBA providing increased access to the capital BIPOC businesses need through CDFIs,” Alfredo Martel, chief executive of Meda, said using the acronym for Black, Indigenous and people of color.
He said Meda, a Minneapolis-based nonprofit minority business counselor and lender, aims to manage applications and facilitate $35 million or so of the forgivable loans.
Last spring, Congress approved $349 billion in the initial round for the PPP. An additional $310 billion was passed for a second round that was distributed in the summer. Congress approved a new relief package just before Christmas, including money for the third PPP round, and President Donald Trump signed it the following week.
It provides for $15 billion to be set aside for community banks, minority-owned financial institutions and CDFI’s that target underserved areas.
The loans are forgivable if used for payroll and other routine expenses. CDFIs, banks and other lenders can make up to 5% for originating the government-funded loans.
When the program first began, thousands of minority-owned small businesses struggled to find banks that would work with them.
Data from the SBA analyzed by the Associated Press showed the overwhelming amount of loans went to white business, including units of large corporations. The program ran April 3 through Aug. 8.
“Many of our businesses were turned down in the first and second round,” Ron Busby, president of the U.S. Black Chamber of Commerce, told the AP. “That caused application fatigue and frustration.”
The AP found that in that first round of funding, six loans were approved for every 1,000 people living in the 20% of ZIP codes with the greatest proportions of white residents, nearly twice the rate of loans approved for people living in the 20% of ZIP codes with the smallest proportions of whites.
That pattern reversed itself over the final four weeks of round two, partly because banks responded to criticism by making it easier for minority business owners to apply for a loan.
SBA spokesperson Shannon Giles said $133 billion, or 25%, of PPP funding had gone to companies in economically disadvantaged areas, and 27% went to low- and moderate-income neighborhoods.
The AP analysis showed restaurants slammed by the virus outbreak got the most loans in the first round. They were followed by law firms and doctors’ practices. National chains, big car dealers funded by private-equity firms, country clubs and other businesses with other access to capital also qualified.
Neal St. Anthony • 612-673-7144