For Louine Raymonvil, the $105,000 Paycheck Protection Program loan his North Miami Beach security business received in June 2020 was a godsend.
“The help was there for me to help with employees, so thank God I got it,” he said.
But getting the loan forgiven has been another story.
The lending program, commonly referred to as PPP, was created by Congress as part of the March 2020 CARES Act and designed to provide relief to small businesses struggling with COVID-19-related closures and disruptions. Under the terms of the program, which was administered by the Small Business Administration, the loans didn’t have to be paid back so long as they were used for payroll and other approved expenses.
The vast majority of small businesses that took out PPP loans have had their balances forgiven, but a small but significant number of small businesses are still struggling to win approval for their requests for forgiveness, nearly two years after the program was first created.
And a Miami Herald analysis of the most recent SBA data finds that forgiveness rates have been significantly lower for small businesses, like Raymonvil’s, that are based in majority Black and majority Hispanic ZIP codes.
The percentage of loans that remain unforgiven in majority Black ZIP codes is more than three times higher than the percentage of unforgiven loans in majority White ZIP codes, while the percentage of unforgiven loans in majority Hispanic ZIP codes is more than double that of majority White ZIP codes.
The analysis of the data, which is current as of early January, included loans approved in 2020, all of which are past the grace period during which PPP loans are not required to be repaid.
The Herald analyzed forgiveness rates by ZIP codes rather than by the race or ethnicity of individual business owners because roughly 70% of loans in the data contained no information about the race or ethnicity of the business owner.
The analysis further showed that forgiveness rates in South Florida trailed the national average. Miami-Dade and Broward counties, which have significant Black and Hispanic populations, had two of the lowest forgiveness rates of any counties in the country, with 82% of 2020 PPP loans forgiven in Miami-Dade county as of early January and 83% of 2020 PPP loans forgiven in Broward county at the time.
Raymonvil, originally from Haiti, went through PayPal for his 2020 loan, which partnered with WebBank. Raymonvil’s request for forgiveness was initially denied and when he called the SBA he was told the issue had something to do with his state registration as a security guard, which is up-to-date.
Raymonvil maintains that the bank is at fault.
“I filled out the report,” he said of his first application for forgiveness. “You have to do your part.”
He points out that a second PPP loan his business received in 2021 from the online lender ReadyCap Lending has already been forgiven as evidence that the issue is not on his end.
Meanwhile the bank keeps sending Raymonvil e-mails calling on him to repay the loan, but he says the money is long gone.
“I cannot give you something I don’t have,” he said.
WebBank and PayPal didn’t provide comment in response to questions from the Herald. The SBA said it could not comment on the Herald’s findings.
‘What did we do?’
For many minority-owned businesses, the first problem was getting a PPP loan.
The SBA tasked banks and other lenders with vetting prospective borrowers, sending them the cash and then processing forgiveness applications.
Researchers at the National Community Reinvestment Coalition, which advocates for better financial and housing access for minorities and underserved groups, sent White and Black borrowers with similar financial profiles to banks to inquire about short-term loans for their small businesses, including PPP loans, in April and May of 2020. White prospective borrowers were more often encouraged to apply for a loan and consider the bank’s other financial offerings. Women were offered less information about the PPP program than men.
“It was blatant discrimination,” said Anneliese Lederer, director of fair lending and consumer protection at the NCRC.
The money for loans in the PPP program came from the federal government, though banks were required to provide the cash up-front and were reimbursed after a loan was forgiven, repaid or considered to be in default. For their efforts, the banks were given fees on a sliding scale based on the size of the loan approved.
The Treasury Department initially advised banks to target their existing customers and the House Select Subcommittee on the Coronavirus Crisis found that this had the effect of making PPP loans less accessible to minority and women-owned businesses and smaller businesses, who already struggled to get access to credit before the pandemic.
It also pushed some minority-owned businesses to turn to lesser-known online lenders.
“I have a business relationship with Chase, but Chase declined me,” said Gigi Mchale, a nurse anesthetist in North Miami Beach who ultimately got a PPP loan as an independent contractor through the online lender Bluevine.
Other Black business owners she knows had similar experiences.
“They were all kind of like ‘What did we do?’,” she said.
Like McHale and Raymonvil, the majority of borrowers still seeking forgiveness in majority-Black and majority-Hispanic areas got their PPP loans through online lenders.
Karen Makange was approved for a PPP loan just under $12,000 from the online lender Kabbage before she’d even finished submitting the paperwork to Truist, where she holds a business account.
But getting the loan forgiven has been hard.
As the Herald previously reported, Kabbage, now operating under the name KServicing, has the lowest forgiveness rate of any major PPP lender.
Makange, based outside Greensboro, North Carolina, operates a performance company that brings in African acrobats to perform across the country.
In the past, she said her company was on the road 300 days a year, but has performed just three times since the beginning of the pandemic.
She first applied for forgiveness in December 2020, but had to resubmit her application in 2021 after the company introduced a new application platform. Then the company asked her to submit the same paperwork over and over.
“My whole life was spent dealing with this,” she said. “I couldn’t do anything with my business.”
She turned to the non-profit Better Business Bureau and the SBA, but got nowhere.
In the meantime, she was already approved for forgiveness for a second PPP loan she obtained in March 2021.
She finally got good news early this month that her loan was forgiven, more than a year after she first sought forgiveness.
“That was such a relief,” she said. “I’m like, ‘I can breathe.’”
In response to questions about its low forgiveness rate, KServicing CEO Laquisha Milner said in a statement to the Herald that “a majority of our PPP loans have already received SBA forgiveness” and that “we will continue to work with our borrowers to help ensure they take the steps required to obtain forgiveness by the SBA.”
Bearing the brunt
The SBA and some lenders changed how they approached the second year of the PPP program in 2021 to help minority and women-owned businesses and smaller businesses who struggled the first year.
The SBA limited applications in the first few weeks of 2021 to businesses with fewer than 20 employees and expanded eligibility for sole proprietors.
Customers Bank, one of the biggest lenders in the program by volume, partnered in 2021 with 26 organizations across the country, including local Black and Hispanic Chambers of Commerce, to offer so-called “white label” loans that were branded with the name of the partner organization. The bank also shared a portion of the fees it earned on the loans with these groups.
Miguel Alban, the director of multicultural banking at Customers Bank, saw the program, which approved more than $26 million in PPP loans, as an opportunity to both do the right thing and expand the bank’s customer base.
“These communities are very loyal. You give them a hand right now, they will remember us,” he said.
But those efforts, unfortunately, came too late for many Black-owned businesses. An August 2020 report by New York’s Federal Reserve Bank of New York found that the number of Black-owned businesses dropped by 41%during the first several months of the pandemic, more than double the 17% of White-owned businesses that shuttered. Hispanic-owned businesses saw the second biggest decline at 32%.
Jason Richardson, director of research at the financial access advocacy group NCRC, said that women and minority-owned businesses always struggle the most during disasters like the COVID-19 pandemic.
“Any time you have an event like this, it is the smallest and weakest businesses that are going to bear the brunt of the damages,” he said.