By CultureBanx Team
- The new law sets aside a portion of the total PPP money to small community banks, credit unions and community development financial institutions
- African-American businesses have experienced a 41% drop since the pandemic started
The new $900 billion Covid-19 recovery stimulus bill includes a new $284.45 billion round of Paycheck Protection Program (PPP) funding, with some major tweaks aimed at fixing some of the issues with the first round. It’s no secret that Black-owned businesses were the hardest hit by the pandemic, with Goldman Sachs (GS -1.09%) finding that 31% of Black small business owners have seen less than 25% of their pre-covid revenue return. Even though 60% of funds borrowed by businesses under the new PPP must still go toward payroll, the other expenses that the remaining 40% can go toward have been expanded and could be a game-changer for Black-owned businesses.
Why This Matters: In response to claims that small, women, and minority-owned businesses didn’t have as much access to the PPP the first time around, the new law sets aside a portion of the total money for small community banks, credit unions and community development financial institutions (CDFI). Typically, CDFIs have a special interest in banking throughout minority communities, reviving struggling neighborhoods, and increasing local economic activity, with hopes of ultimately seeing the Black and brown entrepreneur thrive.
Some of the new expenses covered through the latest round PPP include money needed to make a business Covid-19-safe
Many experts feel the relationship between Black business owners and major banks has accelerated the demise of these companies across the country during the pandemic. The most recent Federal Reserve data illustrates that Black business owners are denied loans at twice the rate of white business owners.
Losses for small business are being felt across nearly all industries. African-American businesses experienced a 41% drop, Latinx business owners fell by 32%, and Asian business owners dropped by 26%.
Unfortunately, the original PPP payments failed to adequately reach Black and Latinx business owners. In fact, only 2% of Black-owned businesses received loans as part of the CARES Act, that’s funded 4.9 million loans totaling more than $521 billion. The application process was run through commercial banks, primarily benefiting those companies with existing relationships.
What’s Next: Some of the new expenses covered through the latest round of PPP can be tremendously helpful for Black-owned businesses. They include costs to install sneeze guards, buy personal protective equipment, switch to outdoor dining and other money needed to make a business Covid-19-safe. The funding can also go toward expenses incurred through vandalism or looting that occurred last summer. Businesses that received a PPP loan the first time can apply for a second loan under the new PPP, with certain restrictions. The program is still administered by the Small Business Administration, which will release details in the coming days/weeks on how to apply.
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