Van Hollen Wants Minority Businesses to Get Equal Treatment Under CARES Act Program
U.S. Sen. Chris Van Hollen (D-Md.) joined a coalition of Democratic lawmakers Friday in the call for the Small Business Administration to make certain that minority-owned small businesses receive fair consideration under the Paycheck Protection Program.
“Congress authorized the Paycheck Protection Program (PPP) to provide financial support and stability to small businesses affected by the COVID-19 pandemic,” legislators wrote to Trump administration officials. “Yet we continue to hear from minority-owned businesses that they face structural barriers to acquiring these loans.”
Van Hollen co-signed a letter with more than 20 U.S. senators and over 50 House members to U.S. Treasury Secretary Steve Mnuchin and Small Business Administrator Jovita Carranza asking them to fulfill the mission of the program by ensuring that minority-owned businesses aren’t “shut out.”
Additionally, they are asking that the Small Business Administration and Department of Treasury modify the program’s policy to reassert the requirement for financial institutions to adhere to fair lending protections and report on applicant demographics.
The Paycheck Protection Program is a loan initiative that businesses can apply for to keep their employees on payroll during the COVID-19 pandemic. The CARES Act apportioned $100 billion for program applicants. The fund ran out of money this week.
Last week, Van Hollen advocated for a plan on the Senate floor to increase funding for small business loan funds created under the CARES Act, including the paycheck protection program.
During a news conference held over the phone last week, Van Hollen said that Senate Majority Leader Mitch McConnell (R-Ky.) “shot down” the package.
The letter issued by lawmakers Friday cites a 2016 Small Business Credit Survey conducted by the Federal Reserve that found that only 40% of minority-owned companies that applied for loans received them in full.
The same survey found that nearly 70% of white-owned businesses with similar credit scores received the full amount of their requested loans.
According to the Minority Business Development Agency, minority-owned business ventures often don’t apply for small business loans out of a fear of being rejected.
The lawmakers explained that they fear the same pattern may follow loans provided by the Paycheck Protection Program.
“The Paycheck Protection Program is a first-come, first-served program, leaving those without existing bank relationships or lines of business credit at a major disadvantage,” they wrote. “People of color are less likely to be approved for a loan, and when they are approved, it is often for smaller amounts with higher interest rates than those offered to similarly situated white borrowers.”
Legislators are asking the Small Business Administration and Department of Treasury to mandate that lenders track the program’s rate of lending to minority-owned businesses, asking them to report on loan applicant demographic information, outcomes, and to include individuals who may have been charged, but not convicted, of crimes or may have served time in detention.
Lawmakers say that tracking the rate of applications and acceptance for small, minority-owned businesses is critical.
“Without stringent reporting, we can neither confirm racial disparities nor correct any exclusionary lending practices under the Paycheck Protection Program,” their letter read. “The story of minority-owned businesses struggling to access capital is the story of banking practices that too often exclude people of color as potential customers. A federally guaranteed loan program must not do the same.”