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Some Black-Owned Businesses Are Turning To New Banks For Paycheck Protection Loans

ARI SHAPIRO, HOST:

When the federal government started making pandemic loans to help keep workers on payrolls, businesses owned by Black and Latino people were often at the back of the line. Those firms often had to wait longer for money, even though many were desperate for financial help. With a new round of business loans in the pipeline, authorities are now trying to address that disparity, as NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Like a lot of business owners, Jennifer Kelly's income took a hit last year when the pandemic struck. She's a clinical psychologist near Atlanta, and some of her clients didn't make the adjustment to online or telephone counseling. Kelly, who has two employees, applied to her regular bank for a loan under the federal government's Paycheck Protection Program. But she says the process was frustrating.

JENNIFER KELLY: It was kind of like trying to get the vaccine. They put my name on a list. And then they finally said, oh, we don't have anymore, and we're sorry.

HORSLEY: That first round of PPP loans was exhausted in less than two weeks. Lots of businesses complained that banks were prioritizing their biggest customers. Loans were especially hard to come by in neighborhoods with a lot of Black and brown residents.

KELLY: When I needed them, they were not available to me. And clearly, I'm not a big business. But I'm a small business, and to me, it's like we're the fabric of America.

HORSLEY: When Congress OK'd a second round of PPP loans last year, Kelly applied again, this time through a bank 250 miles away in Savannah, Ga., that specializes in working with Black-owned firms.

KELLY: They were very patient through that entire process, and I did get approved for the loan. And I do hope that especially these small Black banks will survive because we need to have those institutions.

HORSLEY: That second bank Kelly worked with, Carver State Bank, was founded 94 years ago with a goal of building financial freedom for its African American customers. Eighty percent of its loans go to Black-owned businesses. Robert James, who sits on the bank's board, says he received PPP applications from around the country, most looking for less than $50,000.

ROBERT JAMES: Most of our applications are from very small businesses, the individually owned gas station in the neighborhood or restaurants. Our people deserve a lot of credit for the hard work that they're putting in just to make sure that we get help to the customers that need it the most.

HORSLEY: According to the Federal Reserve Bank of New York, even before the pandemic, Black-owned businesses were more than twice as likely to be on shaky financial footing as white-owned firms. CEO Jeannine Jacokes of the Community Development Bankers Association says that means the extra time it took for loans to reach those businesses could be costly.

JEANNINE JACOKES: They had a lot less cushion to start with, which made them much more vulnerable when the economy went south.

HORSLEY: Authorities have tried to address the disparity in PPP lending in a number of ways. First, they've made more money available. They also gave banks that specialize in minority and low-income communities a head start when the latest round of Paycheck Protection loans was launched last month. Finally, while the loans are designed to be forgiven, some Black borrowers are suspicious, a legacy of the long history of discriminatory lending. So education is also important. Carver State's James says he tries to reassure African American borrowers they can use PPP loans to keep their businesses and communities afloat.

JAMES: I've heard a lot of stories of customers who were eligible for these funds but didn't trust that there wouldn't be some sort of a catch.

HORSLEY: Craig Gordon runs a company that provides in-home nursing care in Georgia. About 30% of his business is on hold right now because many of his customers are wary of letting anyone, even a skilled nurse, into their home during the pandemic. With Carver State's help, Gordon's just been approved for a second PPP loan.

CRAIG GORDON: This will buy us probably three or four months. And I'm hoping that all of those vulnerable folks that we serve, by then, will be well-vaccinated.

HORSLEY: In the meantime, Gordon says the forgivable loan will help him keep dozens of people on the payroll.

Scott Horsley, NPR News, Washington.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.