Monday is the last day for small business owners to apply for a federal Paycheck Protection Program, or PPP, loan, in a third round of lending meant to give a better shot at funds to businesses owned by people of color and small businesses in lower income neighborhoods.
Business owners who want to apply for a loan must do it not through the government itself, but through banks and other lenders. The third round of lending favored community financial institutions, which are meant to be better at targeting smaller businesses and minority-owned businesses.
The first two rounds of lending were done mostly through banks, which in part led to inequity in how the money was distributed, because businesses in lower income neighborhoods are less likely to have an existing relationship with a bank.
In the first two rounds of PPP loans, San Diego County lenders gave 61% of loans to businesses in majority-white census tracts and just under 12% to businesses in majority-Latinx census tracts, according to federal loan and business data provided by the journalism nonprofit Reveal’s Reporting Networks. In census tracts in Imperial Beach, Skyline, San Ysidro, Nestor and Paradise Hills, less than 5% of eligible businesses received loans, while in census tracts in Carlsbad, Poway, Torrey Highlands and Encinitas, 96% to 99% of eligible businesses received PPP loans, according to the Reveal data.
RELATED: Businesses In San Diego’s Majority White Communities Received By Far The Most PPP Loans
In an attempt to correct inequities found across the country, the Biden administration made changes to the third round of PPP lending, including setting aside a two-week period where only businesses with fewer than 20 employees could apply, allowing sole proprietors to get bigger loans, and letting people with both non-fraud felony convictions and student loan delinquencies apply.
“We recognized there were challenges to socially underserved markets in accessing dollars,” said Mike Sovacool, the deputy district officer of the San Diego SBA office. “So in order to meet that need, the SBA instituted some of those programs.”
Local business owner Charlie Johnson aimed to take advantage of those changes in the third PPP round. He owns Makello, which provides solar power, plug-in vehicle and storage solutions for eligible customers.
When the third round of PPP loans were made available in January, Johnson, who is multiracial, “honed in on finding banks that were there and able to support minority and small owned businesses,” he said.
But when he contacted many banks, their websites were not set up to apply for PPP loans, or he didn’t hear back from them.
“That week I spent 40 hours digging into it,” Johnson said.
Then he reached out to Community Development Financial Institutions, which are private lenders specifically focused on giving money to lower-income and minority business owners. That included CDC Small Business Finance, a San Diego-based lender.
“Within six weeks we had funding,” Johnson said.
The third round of PPP loans totaled $800 billion, and as of last week, most of it was already given out. Businesses who receive the loans won’t have to pay them back, as long as they meet certain criteria, including that employee and compensation levels are maintained and at least 60% of the funds are spent on payroll costs.
