The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed in response to the economic downturn and devastation to small and mid-sized businesses caused by the COVID-19 pandemic. Passed in two parts, it allocated $649 billion to assist these businesses in keeping their workers employed. The PPP provides federally guaranteed loans of up to $10 million to small businesses, 100% of which may be forgiven if the borrower retains its employees on the payroll.
Although the CARES Act called for financial institutions to prioritize underserved businesses, minority-owned businesses have been struggling to gain access to necessary PPP relief funds.
According to a recent survey of 500 Black- and Latin-owned businesses, conducted by Global Strategy Group for Color of Change and UnidosUS, almost half of minority business owners say their businesses may not have the funds to survive, and anticipate closing within six months. Although 51% of Black and Latino small business owners seeking PPP assistance requested less than $20,000 in temporary funding, only 12% (1 in 10) received the requested funding. 41% have received no assistance and 21% are still waiting to hear back on whether they will receive any assistance.
“[T]he Small Business Administration’s Paycheck Protection Program is a driver of racial inequality, rather than a means to provide desperately needed relief for the small businesses at the heart of Black and Brown communities,” said Color of Change President Rashad Robinson.
Larger Businesses Outranking Businesses of Color
While the vast majority of underserved and minority-owned businesses have been unable to obtain PPP funding, banks distributing PPP loans are prioritizing their wealthiest clients. According to the Center for Responsible Lending, minority-owned businesses are more likely to be disadvantaged by the manner in which banks lend PPP funds, such as:
- Minority-owned businesses likely have fewer employees and less revenue, making them less attractive borrowers.
- Minority-owned businesses are more likely to have no employees, unlike larger businesses which could garner higher fees.
- The Small Businesses Administration failed to issue guidance to lenders about prioritizing underserved markets, and rural, minority and women-owned businesses
- The PPP excludes people with criminal records, including people who have been charged, but not tried or convicted of a crime.
These barriers, alongside the banks’ prioritization of larger businesses and the fear that these loans will not be forgiven, may have caused many minority-owned businesses to forgo applications for PPP loans.
McCune Wright Arevalo, LLP, Has a History of Successful Representation of Class Action Cases Against Financial Institutions
McCune Wright Arevalo has experience assisting consumers and small business owners in significant contingent class action litigation. We have successfully litigated class action cases against over 50 banks and credit unions in over 22 states.
If you are a minority business owner who applied for the Paycheck Protection Program, but either have not yet received assistance or have been denied assistance, we would like to help you. We encourage you to speak with us about your rights and the ability to pursue those rights as a class action on a contingency basis.
Please call us today at (909) 345-8110.