Ending Discrimination with PPP Forgiveness for Black Businesses in Miami
There have been headline-grabbing abuses involving Federal Paycheck Protection Program loans in South Florida, known for years as the fraud capital of the nation.
There was the woman who allegedly used a $15,000 PPP loan to hire a hitman to kill a Miami federal airport agent. A man who, after his South Florida moving companies secured nearly $4 million in PPPs, used some of those taxpayer dollars to buy a $318,000 Lamborghini Huracan Evo, prosecutors say. A North Miami couple who lied pretending to be farmers, despite living in the suburbs, to get hundreds of thousands of dollars in P3s.
But despite all the bad actors, PPP loans have saved the lives of many small businesses.
And most of the loans have been forgiven, which has always been the plan. The loan program, created by Congress in 2020 to help small businesses weather the financial crisis caused by the pandemic, was designed so businesses don’t have to repay the money as long as they use it to payroll or certain other expenses, such as rent. or debt or utilities. All they had to do was apply for loan forgiveness.
But now, according to an analysis by the Miami Herald, it turns out that the PPP loan forgiveness isn’t exactly equal.
In Miami-Dade County, loan cancellation rates in predominantly black or Hispanic ZIP codes are significantly lower than those in predominantly white areas, the Herald found after analyzing data from the Small Business Administration.
Among the lowest
In predominantly black ZIP codes, the percentage of unforgiven loans is more than three times higher than in white ZIP codes. In predominantly Hispanic zip codes, it’s more than double. And in Miami-Dade and Broward counties, with large black and Hispanic populations, forgiveness rates are among the lowest in the country.
It’s troubling. And, unfortunately, not so surprising.
There is evidence of bias from the start of the program. According to researchers from the National Community Reinvestment Coalition, a group that advocates ending discrimination in housing, lending and business, white potential borrowers were more often encouraged to apply for a loan than black potential borrowers. (In April and May 2020, the organization sent potential white and black borrowers, in similar financial situations, to banks to ask about loans.) Additionally, women received less information than men. .
Anneliese Lederer, director of fair lending and consumer protection at NCRC, called it “blatant discrimination”.
And there is another factor. Some of the problems may be due to another problem that minorities seeking loans have often faced: the inherent biases in the world of loans. Banks were initially encouraged to work with their existing customers to fund PPP loans, but that meant it was more difficult for women- and minority-owned businesses, which already often struggled to get financing. credits.
Many have turned to online banks. And therein lies a large part of the problem now, the Herald said. Most borrowers still asking for forgiveness in majority black and majority Hispanic areas have obtained loans from online lenders.
Yes, PPP loans have been abused by some – and mind-blowingly. But that’s not what we’re talking about here. Minority-owned businesses in this community have turned to the federal program in good faith to help them through COVID, as have so many other white-owned businesses. And they have every right to expect to be forgiven at the same rate.
The federal government launched this program two years ago. It is time for the federal government to go all the way.