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Black-owned businesses hope this P3 cycle won’t fail them

Adrienne Parker knows what it’s like to struggle as a small black business owner during the pandemic.

Sole owner of Peace of Mind Consulting, an Atlanta-based management and accounting consulting firm, Parker has seen much of his income dry up as clients grapple with their own financial difficulties.

So when the first round of Paycheck Protection Program loans became available, she turned to an Atlanta-based Community Development Financial Institution (CDFI), Access to Capital for Entrepreneurs, instead of a big bank.

“I have heard the horror stories and I have witnessed the horror stories firsthand, the experiences with the big banks,” said Parker, 37.

While she finally got a loan of $ 9,000, one of her clients, who went through a larger institution, waited months before knowing he had been turned down.

“Before the pandemic, there was already a disparity in loan approvals for black business owners versus white business owners,” said John Holdsclaw IV, chairman of the board of directors of the CDFI Coalition.

“The pandemic, even with the PPP program, has only widened the gap.”

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CDFIs have long played a role in underserved communities. It is credit unions, banks, microcredit funds or venture capital providers that provide low-income communities with access to financial services. Their communities can trust them more than the big financial institutions.

CDFIs are also among those who have early access to the latest round of PPP loans. When the program reopened on January 11, community financial institutions that work with underserved communities were on the front lines. It opened up to other lenders the following week. Over 60,000 loans were approved this first week.

Parker is among those who have applied for another loan. Others are first-time candidates.

“This next round is huge for black and brown business owners and entrepreneurs,” Holdsclaw said.

This round is just a down payment for 2021, in my mind.
John Holdsclaw IV
CDFI Coalition

There is no exact data on the racial distribution of P3 loans, as any demographic information included in applications is purely voluntary. About 75% of all PPP loans did not include information at the time of application, according to the SBA.

However, PPP data analyzed by The Associated Press showed that many minority homeowners only got loans in the final weeks of the program, which ended on August 8.

The analysis found that six loans were approved for 1,000 people living in the 20% of zip codes with the largest proportions of white residents. This was nearly double the rate of approved loans for those living in the 20% of zip codes with the lowest proportions of whites.

Relief is badly needed. In a September survey by Goldman Sachs, 43% of black small business owners said they would deplete their cash reserves by the end of 2020.

David Reiling, CEO of Minneapolis-based CDFI Sunrise Banks, is heartened by the response to this latest round of PPP loans. The extra time allowed her bank to raise awareness in the community and help underserved business owners navigate the process.

Of the 2,500 applications received to date, 1,700 are complete. Of these, 800 are first-time PPP borrowers, with an average loan of around $ 30,000. About 45% are from low and moderate income communities, 25% are African American, 10% are Asian, and about 25% have not disclosed their race.

Yet, it will take more to help these businesses survive.

“In some cases, a small grant can be a more effective and efficient way to support these small businesses,” Reiling said.

“They need a little boost in equity to get through Covid.”

Holdsclaw hopes the SBA will continue to reach out to CDFIs and other organizations to reach out to minority communities.

“This round is just a down payment for 2021, in my mind,” he said.

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Disclosure: NBCUniversal and Comcast Ventures are investors in Tassels.

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