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COVID-19 in Maryland Working & the Economy

White and Black Communities in Md. See a 20% Difference in CARES Act Loans

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By Amina Lampkin

Predominantly white communities in Maryland received approximately 20% more loans and money per loan under the Paycheck Protection Program compared to predominantly Black communities, according to data from the Small Business Administration (SBA) analyzed by Capital News Service.

The Paycheck Protection Program was a derivative of the approximately $2 trillion Coronavirus Aid, Relief, and Economic Act (CARES) passed to provide economic relief in response to the coronavirus pandemic. The law provided a provision to help small businesses continue to pay their employees, as well as fund other essential business expenses.

From a dataset of approximately 60,000 loans issued to Maryland businesses, each less than $150,000, the average loan amount in a predominantly white zip code was $36,083 while the average for a predominantly Black zip code was $29,080. The $7,003 difference means that Black communities are receiving about 21.5% less money in loans.

The map below displays the average loan size of each zip code in the state. Darker red areas indicate a higher average loan amount in that zip code. Toggling through the different layers will group the zip code averages by predominantly white or Black zip codes.

Exploring the same dataset, the average number of loans for a white community was 356 and 289 in a Black community, equivalent to a 20.8% difference in the number of loans. To visualize the difference in the number of loans, the map below groups the zip codes by whether they are predominantly white or Black. Darker colors indicate a higher number of loans in that zip code.

Using the American Community Survey to estimate demographic data for each zip code in the state, a predominantly white or Black community is defined as a population with a percentage of that race greater than or equal to 50%. A map of estimated demographic data for Maryland can be explored here.

To avoid harming any small businesses, the SBA anonymized the businesses in the dataset.

As a result, the granularity of the analysis is constrained to examining available factors like loan amounts, the zip codes where these businesses are located, the number of jobs reported, and the North American Industry Classification System (NAICS) code that describes what industry the business serves. The names of specific companies, and other identifying factors, were not included in the data.

Although two weeks ago a federal judge ruled in favor of media companies that requested access to the fully identifiable information for all businesses that received a loan, the SBA was then granted a delay on having to release this information.

The highest Paycheck Protection Program loan in Maryland of $149,975 was awarded to a Hagerstown-based limited liability company in the air transportation industry with 30 reported employees, according to the dataset. Examples of the work they specialize in may include aircraft maintenance and repair, as well as aircraft testing services, according to their NAICS code.

On the opposite end of the spectrum, the lowest loan – amounting to $6 – belonged to a northern Baltimore business in the gift, novelty, and souvenir industry, according to the data and NAICS.

Missing information in loan applications combined with the ability of lenders to approve partial loans might explain some of the lower loans in the dataset.

In white communities, full-service restaurants appear to have been awarded the most loans, cross checking the dataset with NAICS. In juxtaposition, religious organizations stood out as the single most number of loans in Black communities.

In a landmark and contentious decision, the SBA extended loan eligibility for non-profits and by extension, religious establishments. Critics of the decision claimed the eligibility clause deteriorates the separation of church and state. The SBA invoked the second portion of the first amendment to defend its decision, citing that they would not want to bar certain applicants on the basis of religious background.

Within the set of white communities, Rockville business owners applied for the most loans totaling $60.7 million, funding 6,554 jobs.

For Black communities, the area of Upper Marlboro, that includes towns like Glenarden, Largo, and Ardmore, reported the most loans, totaling $18.6 million for 1,957 jobs.

On a national level, the SBA’s Office of the Inspector General found that minority, women, and veteran-owned businesses were not prioritized as required by the Paycheck Protection Program’s statute in the CARES Act.

Although the SBA was charged with disseminating guidance for lenders on how money should be disbursed to ensure equity, the inspector general found no evidence of any such guidance being passed down to lenders requiring them to prioritize this special population of small business owners.

Given that there was no place for applicants to input standard demographic information on the loan application in the first round of loans, the report recommended a place for demographic information when businesses begin the process of applying for loan forgiveness.

Less than 4% of the records in Maryland list the business owner’s race; about 13% report the business owner’s gender; and less than half a percent are veteran business owners.

The inspector general took issue with the SBA’s stipulation requiring borrowers to allocate at least 75% of the loan toward payroll expenses to be eligible for full loan forgiveness, despite there being no requirement in the CARES Act. The SBA also ruled that businesses were subjected to pay back any loans that were not forgiven within two years, when the CARES Act provided up to 10 years for repayment.

By nature of their size, small businesses have more operational than employee expenses, resulting in tens of thousands of borrowers burdened with repaying those non-payroll expenses in less than two years, said the report.

To rectify the consequences of the loan forgiveness eligibility requirements, the report recommended the SBA “…evaluate the potential negative impact to borrowers…and update the requirements, as deemed necessary.”

Following the release of the report, in early June the Paycheck Protection Program Flexibility Act of 2020 was signed into law, providing some retroactive amendments to the program from the CARES Act. The SBA issued an updated set of interim rules in accordance with this amendment.

Revisions included providing a new, but optional, borrower demographic information form submitted when businesses apply for loan forgiveness, as well as a 15% reduction in the proportion of the loan that must be used toward payroll expenses to qualify for full loan forgiveness, according to a June issue of the Federal Register.

Businesses that received a loan prior to the enactment of the Flexibility Act were allowed to discuss extending the time they had for repayment with their lenders. Businesses applying for a loan on or after the enactment of the Flexibility Act were given a minimum of five years to repay any loans.

Through and through, politicians, lenders, and business owners have found difficulty managing the varying levels of rules and regulations that have come with the Paycheck Protection Program. With a more robust dataset likely to be released sometime in the near future, there will be more opportunities to assess the true impact of the program within the state of Maryland and nationally.


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White and Black Communities in Md. See a 20% Difference in CARES Act Loans