According to a report released last week, a huge number of the nation's Black-owned businesses have shuttered due to the COVID-19 pandemic. Economic stimulus funds that were intended to keep minority-owned small businesses alive did not get to them in time or at all, leaving their owners with no other options.
Some 440,000 of the country's roughly 1 million Black-owned companies have closed for good since the start of February, CBS News reported on Friday. The report noted that the vast majority of those companies that sought emergency relief funding through the federal Paycheck Protection Program were initially rejected — one analysis found that 95% of black-owned business were excluded.
When Donald Trump signed the $6.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act in March, he promised that its $350 billion Paycheck Protection Program and other provisions would "keep our small businesses strong and our big businesses strong. And that’s keeping our country strong and our jobs strong."
But the initial funds for forgivable small business loans quickly ran out. Much of that money actually went to larger companies and to banks. And provisions in the law requiring that women- and minority-owned businesses be prioritized were not adhered to, according to a report issued by the Small Business Administration's inspector general in May.
Many of the banks tasked with distributing loans under the program instead prioritized big companies with which they had existing business relationships. Better-connected businesses were able to get much of the cash before it ran out, leaving many less-connected ones — including many Black-owned businesses — out in the cold.
While Congress added another $310 billion to the program in April, this was of little help to many Black-owned businesses. According to the Center for Responsible Lending, the program's structural design advantaged businesses owned by white people over those owned by people of color.
These structural disadvantages, they noted, included a fee structure that "heavily discourages small loans to smaller businesses and, in particular, non-employer firms." Firms owned by people of color are significantly more likely than white-owned businesses to have few or no employees.
The report also said, "Pre-existing disparities in access to capital have posed further disadvantages for business owners of color, both by making it less likely that they would have the commercial lending relationships necessary to access the PPP program and by discouraging many from applying."
And the Small Business Administration failed to provide the guidance needed to implement the program's provisions on priorities.
As Black-owned businesses were losing out during the initial days of the program, another group saw its loan requests approved: people in Trump's inner circle.
According to a report published in May by the Center for American Progress Action Fund, at least 12 of Trump's friends and allies received early aid. These included companies owned by Trump megadonor Monty Bennett, a data firm working for Trump's 2020 campaign, and a business owned by the wife of his top economic adviser Larry Kudlow.
Trump once called Dan Gilbert, whose companies received a $50 million contract to distribute the loans, "a great friend of mine, a supporter and great guy." Ronald Gidwitz, whose Continental Materials Corp. got $5.4 million in loans through the program, gave Trump's campaign at least $50,000. Hallador Energy, a coal company whose Indiana state lobbyist is Trump’s former Environmental Protection Agency Administrator Scott Pruitt, received a $10 million loan.
The Trump administration has touted the growth of minority-owned business on his watch.
Last March, Commerce Secretary Wilbur Ross and Minority Business Development Agency Director Henry Childs published an op-ed in the Hill titled, "Celebrating the rise of minority-owned businesses." "This administration has proven that when we put American businesses first, all Americans flourish," they wrote. "That work will never cease, and we look forward to the greatness minority businesses will achieve in the years to come."
Published with permission of The American Independent Foundation.