Congress has altogether approved $484 billion in economic relief funding through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to be distributed through the Small Business Administration’s (SBA) Payroll Protection Program (PPP) loan and Economic Injury Disaster Loan (EIDL) programs.
According to the SBA website, “The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. [The] SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.”
The assistance sounded too good to be true - and unfortunately for many Black business owners, it seems that it was.
Applicants and the general public soon learned that loan requirements - such as prior established relationships with a mainstream bank - were biased. This meant that companies with personal connections, not the ones that needed it most, received funding first. Big corporations (like the NBA, Shake Shack, and Harvard University) quickly crowded the application pool, exhausting its funds, and loan forgiveness wasn’t as easy to access as hoped.
"There is a structural flaw in this program. It uses banks as middlemen. Any time you create a big program and give banks the ability to choose which customers it prioritizes, you're going to have disparities," Mehrsa Baradaran, a law professor at the UC Irvine told NBCNews. "Credit disparities are where past injustices lead to present disparities."
Without access to relief funding, many business owners were left to exhaust all their existing resources and forced to choose between paying rent and utilities and protecting staff from layoffs or furloughs.
To counteract such a devastating roll out, a number of Black-owned commercial banks, credit unions and financial technology companies are partnering with respected entrepreneur Sean “Diddy” Combs to help businesses shut out from the first round of SBA PPP lending take advantage of subsequent rounds.
According to its website, platform and initiative Our Fair Share launched in late April 2020 to “educate and guide minority small business owners, non-profits, independent contractors and churches through the SBA PPP loan programs available … through the recently passed CARES Act.”
“COVID-19 is devastating our communities and without access to stimulus funding we risk losing critical businesses that create jobs and help build opportunities and wealth in our communities,” Combs said in a press release. “I created Our Fair Share to help entrepreneurs play on an even playing field and give them a chance to survive with the hope to thrive.”
National Bankers Association-represented banks and other community development financial institutions (CDFIs) have now shifted their priorities to participate in the latest round of SBA lending. One example is OneUnited, the largest Black-owned bank in the country.
Typically OneUnited’s lending portfolios focus on real estate loans secured by property collateral. But since the bank’s president and COO Teri Williams learned that only a handful of OneUnited customers were approved in the PPPs first round, the bank is switching gears to advocate for the communities struggling to weather the disproportionate effects of the coronavirus (COVID-19) pandemic.