The Small Business Administration (SBA) began accepting new applications for the third round of Paycheck Protection Program (PPP) loans on January 15, 2021. PPP loans continue to be a critically important mechanism to get funding into the hands of business owners across the country. In particular, Black businesses who have been hardest hit by this year’s global health emergency. This round, however, Congress is using lessons from the last year to help better reach businesses owned by people of color.
In March of 2020, Robert F. Smith saw a problem with the distribution of PPP loans: Black communities were being left out of the funding. As Smith pointed out during an interview, there were structural problems limiting these communities from getting the aid they needed, like the fact that 70% of majority-Black communities don’t have a bank. Smith noted, “If these Black businesses fail, these are the largest employers in our community. If they fail during covid-19, it may be decades before they come back again. I saw it in my own neighborhood as a child.”
By collaborating with the Rev. Al Sharpton, Magic Johnson, Jamie Foxx and others, Smith launched a public education campaign targeting communities of color. He also worked with a bipartisan group of policymakers to create a $10 billion pool of money for Community Development Financial Institutions (CDFIs).
This work influenced the outreach and disbursement strategy for the latest round of PPP loans. Congress began with implementing a three-day exclusivity period for CDFIs that chiefly aids businesses owned by people of color. In Minneapolis, Alfredo Martel, chief executive of a business counseling and lending business that works with marginalized businesses recognized the change in processes this time around. “We appreciate SBA providing increased access to the capital BIPOC businesses need,” Martel said. SBA spokesperson Shannon Giles, said that $133 billion, or 25%, of PPP funding has been already awarded to companies in economically-disadvantaged areas, up significantly from the first round of loans in 2020.
By focusing on equity and making a concerted effort to include marginalized communities in federal relief efforts, we can reduce the racial wealth gap in America and protect important Black-owned businesses.
To learn more about the Paycheck Protection Program, visit the U.S. Small Business Administration’s website.