HR Dive: Black business owners discouraged from applying for PPP loans, study says

HR Dive, July 23, 2020: Black business owners discouraged from applying for PPP loans, study says

The PPP loan program, a component of the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law March 27, was created to primarily assist small business owners with employee salaries and other expenses. The Small Business Administration (SBA), in coordination with the Treasury Department, oversees the program. But U.S. banks distribute the loans, which has caused some controversy.

The intentions of the program are good, but there’s a flaw in the PPP distribution structure, Mehrsa Baradaran, a law professor specializing in banking law at the University of California, Irvine, told Banking Dive, a HR Dive sister publication. “We rely on banks, and banks can choose their customers,” Baradaran said. In regard to banks providing the loans on a first-come, first-served basis, they “didn’t have a legal obligation to do it, and that’s the problem,” she said.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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