After the pandemic forced her to stop offering ceramics classes, Jennie Tang decided to apply for an emergency forgivable loan offered by the city of Minneapolis.

It wasn’t until after she hit “submit” that she learned she didn’t qualify — because her business isn’t located in a part of the city already considered distressed or otherwise vulnerable. “Wow,” Tang said. “It’s stunning to me that we aren’t eligible … Even if we can open, it’s going to be a challenge when we do.”

The city received more than 1,200 applications from businesses seeking $5,000 or $10,000 forgivable loans to help them survive the pandemic. About 400 are likely to be disqualified because they’re outside the zones designated by the city for assistance.

Minneapolis Mayor Jacob Frey and leaders in the city’s Community Planning and Economic Development department said the city cannot provide enough money to help everyone, and they wanted to prioritize communities that are already suffering and would likely be disproportionately harmed by the pandemic, including people of color.

“To abandon our conviction during a crisis would be to deal in ornamental policy,” Frey said.

But some small-business owners and others in City Hall have since questioned whether there might have been other ways to accomplish those same goals.

Need, or geographic area?

Council Member Jeremy Schroeder, who represents one of the three city wards that don’t include any of the eligible zones, has asked the city to consider making changes and to speed up the rollout of another emergency loan program that would be available citywide.

“What I’d like to see is if it’s going to be based on need, have it based on need and not geographic area,” Schroeder said. “These small businesses are the backbone for the community.”

Schroeder said he fears the forgivable loan program is currently “missing a lot of critical businesses,” such as the corner stores that exist outside of the eligible zones but still prop up their blocks.

To qualify for the forgivable loans, the small businesses must be located in certain zones already targeted for special assistance, such as Cultural Districts or Areas of Concentrated Poverty. The city doesn’t have data that would show what percentage of city businesses are located inside those zones, according to city spokeswoman Sarah McKenzie.

City Council Member Cam Gordon, in a public meeting last month, said that when he learned of the program he immediately thought of businesses that could benefit, naming the Gandhi Mahal restaurant, the Nomadic Oasis barber shop and Afro Deli as examples.

But when he looked at the map, he said, he realized they wouldn’t qualify.

The mayor has consistently defended the decision to focus the forgivable loans on specific zones. Initially created for different programs, the districts were drawn around areas where data showed that there had been “systemic inequities” in the past, either because of redlining or other factors, Frey said.

Some of those districts were drawn using census data. The city has used other criteria, such as income, to direct some of its business aid in the past, particularly if the programs were funded by federal dollars. Both approaches will leave out some businesses, including some owned by people of color, McKenzie said.

When it created the new forgivable loan program, the city tried to focus on areas that “historically have deeper losses and longer recovery periods during economic downturns,” she said.

It’s too early to tell which businesses will receive forgivable loans and whether the city will achieve its goal of promoting racial equity.

Of the roughly 800 businesses that appear to have met the geographic criteria, early estimates showed that about 45% of applicants described themselves as black or African-American, 35% as white and 10% as multiracial, McKenzie said. About 13% listed themselves as Hispanic or Latinx.

Only a minority of those who applied — likely less than 200 — will receive the forgivable loans. With demand surpassing the amount of money that is available, the city will use a lottery to select the businesses that receive aid.

The city plans in the coming weeks to roll out a business assistance program that would be available citywide. That will be a modified version of the city’s 2% loan program, which offers larger loans, with the city’s share typically ranging between $50,000 to $75,000. Those loans are given to businesses that get matching assistance from a private lender.

Because money from that program was shifted to the emergency forgivable loans, the city will only have about $500,000 available, or enough for six to 10 loans this year.

‘We all need the help’

For small-business owners outside the eligible areas, the geographic limits on the city’s forgivable loans represent another hurdle in an already frustrating search for aid.

Tang wasn’t relying on the city’s program alone to help her studio, the Workshop Mpls, in the Keewaydin neighborhood.

She has applied for a federal Economic Injury Disaster Loan but hasn’t received an update yet. She applied for a loan through the Paycheck Protection Program, but the bank ran out of money the first time.

She finally got one this week. That will help with payroll for her six employees, but the rent and utilities are still due.

Tang has tried to create new revenue by selling take-home clay kits through her studio. She also launched what she called her own “stimulus plan,” accepting donations from some of her supporters.

Tang said she understands the city’s desire to promote equity — noting that women and people of color are likely to face different obstacles when running a business — but wonders how they’ll achieve that goal, given the limited amount of money.

“I want equity more than anybody,” she said, noting that she’s made it a priority in her own business, “but this doesn’t seem to make a lot of sense.”

“Some areas of the city may have higher challenges than others, but we all need the help.”