Black- and Latino-owned businesses were less than half as likely as white-owned firms to be fully approved for loan applications over the past year, the Federal Reserve said Thursday.
Black- and Latino-owned businesses with low credit risk were approved for loans at roughly the same rate as white-owned businesses with medium- and high-credit risk, according to the nationwide survey of more than 14,000 businesses with up to 500 employees.
The survey underscored stark racial disparities in access to credit across the U.S. at the same time that the coronavirus pandemic has hit communities of color disproportionately hard. Ninety-three percent of Asian-owned firms, 86% of Black-owned firms and 85% of Latino-owned firms reported sales declines because of Covid-19, according to the survey, compared with 79% of white-owned firms. Minority businesses were also less likely to access federal relief loans that were offered through emergency legislation over the past year. Black-owned firms were five times as likely as white-owned firms to not receive any of the Paycheck Protection Program funds they applied for, the survey found.
“By prioritizing clients that already have existing lines of credit, Black businesses and nonprofits find themselves yet again excluded from live-saving relief,” a group of Black CEOs and investors wrote in a letter to Congress last year that called for racial equity in coronavirus relief programs. “Without significant intervention that takes these disparities into account, the Black businesses and nonprofits that were able to make it against all odds will be forced out of our economy and communities.”
This story is developing.