The Small Business Administration (SBA) is doing a better job approving Paycheck Protection Program (PPP) loans for Black businesses than last year. As of January 24, 2021, the SBA approved 5,931 loans to black businesses worth $182 million. It approved 10,013 loans worth $755.5 million to Latino businesses.
The $900 billion stimulus bill signed by President Trump in December added $284 billion on top of the $510 billion Congress previously allocated for PPP loans under the CARES Act.
Of that, $15 billion was set aside for initial PPP loans and $25 billion for second PPP loans for small-business borrowers with 10 or fewer employees as well as businesses in areas deemed to be of low to moderate income. Loans up to $250,000 are being approved.
The stimulus package also earmarked funding for organizations that help minority businesses. Small community banks and small credit unions can guarantee $15 billion in loans and another $15 billion is set aside for mission-based community lenders such as community development financial institutions (CDFI), certified development companies, minority deposit institutions (MDI) and SBA Microloan intermediaries.
There are 28 CDFIs providing PPP loans in the current round. Seven are located or have offices in Tennessee. Pathway Lending, Lendistry, and Hope Credit Union are accepting applications from the public. Four Tennessee CDFIs make PPP applications for existing customers only.
“A borrower does not apply directly to the SBA. The lender is the one who submits the SBA loan application to the SBA,” said LaTanya Channel, director of the Tennessee SBA district.
Last year, all Tennessee businesses received about 100,000 PPP loans worth $8.9 billion. Many small and minority-owned business owners applied for PPP loans, or tried to apply, but were not approved.
Nationwide, SBA backed 5 million loans worth $525 billion from 5,460 lenders last year. CDFIs and MDIs counted for just 432 of the lender pool. They made about 80,000 loans worth about $16.4 billion. Community lenders accounted for just 3% of last year’s PPP loans.
“Congress has to fix that problem. That’s where my frustration is just as strong as the rest of the community,” Channel said.
Big banks were already familiar with SBA loan applications and their customers who applied for loans had an easier time getting them. Minority lenders (MDI) and Community Development Financial Institutions (CDFI) were generally unfamiliar with the SBA and that was a handicap for their customers who are mostly from underserved communities.
It didn’t help that the SBA’s portal kept crashing under the volume of applications. The SBA also changed the rules in mid-stream and that confused both lenders and borrowers. Many of PPP’s first round loans went to large companies, not the small ones Congress intended to help with the CARES Act.
Last Spring, reporters wrote about large companies and pro sports teams like the L.A. Lakers, who got loans. Some borrowers, like the Lakers, gave the money back. Others didn’t. The money ran out before many small businesses could navigate the application process.
Congress renewed PPP funding in April 2020 but that money ran out, too. The second PPP round reached more small and minority business owners than the first round. (See Minority Businesses Are Getting more Paycheck Protections Loans, Tennessee Tribune, June 4, 2020)
| Nashville Zip Codes | Number of PPP Loans Last Year |
| 37208 | 332 |
| 37218 | 126 |
| 37189 | 52 |
| 37207 | 453 |
| 37209 | 722 |
The number of PPP loans in Nashville’s Black neighborhoods in 2020
Congress approved an additional $900 billion stimulus package in late December 2020 and the PPP loan deadline has been extended until March 31, 2021.
Sole proprietors, independent contractors, and self-employed persons can get PPP loans. For more info go here: https://www.sba.gov/document/support-how-calculate-first-draw-ppp-loan-amounts
The “Second Draw” PPP will be limited to companies with fewer than 300 employees, down from 500 in round one, who can show at least a 25 percent drop in revenue for any one quarter in the last fiscal year.
Women Business Centers, Veterans Business Outreach Centers, Small Business Development Centers (SBDC), and SCORE, a non-profit network of volunteer expert business mentors, receive federal funding to meet the needs of small business owners.
Channel said that SBDCs are the counseling arm of the SBA. There are more than 1,000 SBDCs that offer their counseling services for free, paid for by tax dollars, to provide counseling services on a one-on-one basis to small business owners and entrepreneurs. There are five SBDCs in Nashville and one at Tennessee State University.
