Small Community Banks Help Black Businesses Stay Afloat Amid the Pandemic

What started to be a regional outbreak, soon spread out to become a global pandemic and has impacted global economies and individual lives.

The impact of the coronavirus pandemic on the U.S. economy has left millions of Americans in financial trauma. Millions have been forced out of their jobs, and minority communities particularly Black and Latinx communities have felt a greater impact.

In an attempt to salvage Americans from the economic mishap caused by the pandemic, the federal government introduced several Covid-19 relief programs like the CARES Act. Struggling companies and businesses were not left out of the relief programs as the government introduced the Paycheck Protection Program (PPP) to help employers pay workers’ salaries.

While many businesses have benefitted from the Paycheck Protection Program, Black- and Latino-owned small businesses have had many difficulties receiving funds from the PPP. For this reason, small community banks are stepping in to provide these small businesses with financial support to keep them afloat amid the coronavirus pandemic.

The struggles of small businesses were heightened as large banks deliberately refused to work with minority business owners, even the ones that had accounts with the banks. Some of these banks either deliberately skipped their minority customers or rejected their applications for funds over being suspicious of the minority borrowers.

“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 catch,” said Robert James II, chairman of the National Bankers Association.

The issue of small businesses struggling was so prevalent last year, causing Congress to add another $284 billion to the Paycheck Protection Program fund, with $12 billion designated for Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs). These banks include Carver, United One, and Citizens Savings Trust.

Jay Reynolds of Florida-based staffing firm Wolfcreek Consulting told Black Enterprise last summer that NDC was one of the community banks that greatly helped a lot of businesses during the wake of the pandemic.

“I had a couple of conversations with NDC and we went through the numbers and they were able in a fairly straight fashion to get that PPP funding, and it came along at a time where it was absolutely necessary,” Reynolds said. “Through NDC and having that conversation with them, [it] helped us through some terrible things happening to the business. I don’t want to say close or lay off people, but I can tell you they literally made a difference.”

In the second round of the PPP funding, minority-owned businesses had better access to funds as large businesses like Shake Shack were shamed for accepting the funds ahead of smaller businesses.

“When the Paycheck Protection Program was passed, a lot of these mom-and-pop businesses got muscled out of the way by bigger companies that jumped in front of the line,” said U.S. President Joe Biden.

To help small businesses get the funding they need, the Biden administration on Monday made significant changes to the PPP. These changes include keeping out businesses with over 20 employees for the first two weeks after new funds are added to the program.