Third round of PPP has begun, with a head start for minority-owned businesses

The U.S. Small Business Administration launched the third wave of its Paycheck Protection Program forgivable-loan initiative, starting with a three-day exclusive outreach through U.S. Treasury-certified Community Development Financial Institutions that chiefly aid minority-owned businesses.

The first two rounds of the program were criticized for disproportionately favoring larger, white-owned businesses. But the new round, which began Monday and will distribute up to $284 billion to U.S. businesses, will see applications through Wednesday from businesses that typically lack traditional relationships with banks.

"We appreciate SBA providing increased access to the capital BIPOC businesses need," Alfredo Martel, chief executive of Meda, said, using the acronym for Black, Indigenous and people of color.

He said Meda, a Minneapolis-based nonprofit minority business counselor and lender, aims to manage applications and facilitate $35 million or so of the forgivable loans.

Last spring, Congress approved $349 billion in the initial round for the PPP. An additional $310 billion was passed for a second round that was distributed in the summer. Congress approved a new relief package just before Christmas, including money for the third PPP round, and President Donald Trump signed it the following week.

It provides for $15 billion to be set aside for community banks, minority-owned financial institutions and CDFI's that target underserved areas.

The loans are forgivable if used for payroll and other routine expenses. CDFIs, banks and other lenders can make up to 5% for originating the government-funded loans. When the program first began, thousands of minority-owned small businesses struggled to find banks that would work with them.

"Many of our businesses were turned down in the first and second round," Ron Busby, president of the U.S. Black Chambers, told the AP. "That caused application fatigue and frustration."

Frank Dogbe, owner of Minneapolis-based SOS Building Services, received an SBA PPP loan in the second round last year. He said Tuesday that he has submitted another PPP loan application for about $100,000 for his 20-employee company through Neighborhood Development Center, a CDFI that processed last year's loan as well.

Dogbe also dug into his own savings last year to keep the company afloat. He said SOS is expanding with a couple of new commercial-cleaning contracts in February and will add employees.

The AP found that in that first round of 2020 funding, six loans were approved for every 1,000 people living in the 20% of ZIP codes with the greatest proportions of white residents, nearly twice the rate of loans approved for people living in the 20% of ZIP codes with the smallest proportions of whites.

That pattern reversed itself over the final four weeks of round two, partly because banks responded to criticism by making it easier for minority business owners to apply for a loan.

The AP analysis showed restaurants slammed by the virus outbreak received the most loans in the first round. They were followed by law firms and doctors' practices. National chains, big car dealers funded by private-equity firms, country clubs and other businesses with other access to capital also qualified.