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Disparities in PPP Lending by Gender

The Paycheck Protection Program (PPP) was Congress’s main effort to ameliorate the pandemic’s effects on small businesses. As of January 31, 2021, the Treasury Department doled out over 6 million loans totaling nearly 600 billion dollars with an average loan amount of $98,560. The initial rollout of the program has been criticized for favoring larger businesses seeking higher loan amounts and effectively shutting out smaller minority and women owned businesses most likely to shutter their doors without immediate financial relief. (https://www.bloomberg.com/graphics/2020-ppp-racial-disparity/; https://www.prnewswire.com/news-releases/new-study-finds-women-owned-businesses-were-passed-over-in-the-ppp-loan-process-301046329.html)

The data from the Treasury department shows that loan averages for the first window of PPP loans, between April 3rd and April 16th, before the money ran out were much higher than the loans paid out the months following. All of the PPP loan data shows that male owned businesses received a larger loan amounts than female owned businesses and at a higher rate compared to the number of male owned businesses in the nation. According to 2017 Census data, women owned businesses made up 39% of employer and non-employer firms in the United States (https://data.census.gov/cedsci/all?q=AB1700CSA01; https://www.census.gov/programs-surveys/abs/data/nesd.html). In the first window of the PPP program women owned businesses made up only 22% of the firms that responded to the gender demographic question for PPP loans. From April 27th 2020 to January 31st, 2021 women owned businesses made up 27% of the firms that responded to the gender demographic question for PPP loans.  Therefore, women owned businesses received loans at a rate between 12-18% less than there overall make up as business owners in the nation.

There is also evidence for both periods PPP loans were made available the percentage of women owned businesses receiving loans and the average amount they received is even lower than the data indicates. For both time periods female owned businesses received lower average loan amounts than male owned businesses and loan applicants that did not respond to the gender question on the application.  

Simple regressions which omitted unanswered responses, and controlled for the number of employees a business, whether the loan was made to a rural or urban business, whether the firm was a nonprofit and whether the business was located in an area defined by the SBA as a Historically Underutilized Business Zone (HUBZone) showed that women owned businesses received significantly lower loan amounts than male owned businesses (P-Values less than .1%) for the time periods represented in the charts below. From April 3rd to April 27th 2020, women owned businesses received an average of $21,848 dollars less than male owned businesses. From April 27th 2020 to January 31st 2021, women owned businesses received an average of $11,215 dollars less than male owned businesses.

In the first period that PPP loans were available, businesses that did not respond to the gender demographic question in their loan application received higher average loan amounts than the respondents that did respond to the gender demographic question. Given that women owned businesses received significantly lower loan amounts than male owned businesses in both time periods the unanswered loan amount category should fall in the upper-middle range of the average loan amounts for male and female owned businesses if it comprises the same ratio of male to female owned businesses as the firms that responded to the demographic question on their loan applications. The higher loan averages for the unanswered category between April 3rd to the 16th suggests two things.

  1. Female business owners were likely even more underrepresented than the data suggests.
  2. The discrepancy of average loan amounts between male and female owners is even higher than the data suggests for the first time period PPP loans were given.
Chart: PPP Loans by Gender from April 3rd to 16th 2020
Table 1: Average Loan Amounts by Gender from April 3rd to 16th, 2020
Table 2: Average PPP Loan Amounts by Gender from April 3rd to 16th, 2020
Chart 2: PPP Loans by Gender from April 27, 2020 through January 31, 2021
Table 3: Average Loan Amounts by Gender from April 27th, 2020 to January 31st, 2021
Table 4: Average Loan Amounts by Gender from April 3rd to 16th, 2020
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Disparities in PPP Lending by Race

PPP loan data on race reveals disparities in the number of loans for the first time period PPP loans were given and amount of loans given to minority and non-minority owned businesses for both time periods. According to 2017 Census data minority owned businesses made up 31% of employer and non-employer firms, non-minority owned businesses made up 68% of total businesses in the U.S., and businesses equally minority and non-minority owned made up less than 1%. According to loan data in which respondents answered the demographic question on race, non-minority applicants received 83% of loans and minority businesses only received 17% of loans for the first period PPP loans were available. Black owned businesses fared the worst compared to their overall make-up of businesses owners in the first window of opportunity. Black owned businesses only received 1.6% of loans when they made up 10% of U.S. businesses owners according to U.S. Census data.

Chart 1: PPP Loans by Race from April 3rd through 16th, 2020
Table 1: Average Loan Amounts by Race Compared to White Owned Businesses from April 3rd, 2020 to January 31, 2021
Chart 2: PPP Loans by Race from April 27, 2020 through January 31, 2021
Table 2: Average Loan Amounts by Race Compared to White Owned Businesses from April 27th, 2020 to January 31st, 2021
Table 3: Average Loan Amounts by Race Compared to White Owned Businesses from April 27th, 2020 to January 31st, 2021
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Redlining Reparations: Evanston Illinois takes a Lead in Addressing the Race Wealth Gap

“This neighborhood houses the large negro population living in Evanston. It is somewhat better than the average negro district in that the bulk of the houses are one family detached units in anything but a congested district for this class of population. Here live the servants for many of the families all along the north shore. There is not a vacant house in the territory, and occupancy, moreover, is about 150 percent for most houses have more than one family living in them. Sales have been very good where liberal financing terms are available, but on other sales mortgage financing is virtually impossible to obtain.  This concentration of negroes in Evanston is quite a serious problem for the town as they seem to be growing steadily and encroaching into adjoining neighborhoods. The two family structures are in most cases converted singles and they likewise are overflowing with occupants; these buildings are rented as unheated units. The number of persons on relief in this district is probably heavier than in any other area along the north shore. Although this area is unattractive to other than the class of occupants already here, it is difficult to say that the section is declining, for it is in constant demand because of the limited number of areas available for negro occupancy in the north shore towns.

Location: Evanston, Ill.                  Security Grade: D             Area No: 2          Date: Jan. 1940

(https://dsl.richmond.edu/panorama/redlining/)

Evanston, IL will be the first city in the United States to make good on their promise to offer a reparations program to its black residents that have suffered economic devastation from discriminatory lending practice (https://www.cityofevanston.org/government/city-council/reparations). In 2019, the city council voted to provide $10 million towards a housing program for black residents, and on March 1st the Council approved a $400,000 initiative to be doled out in $25,000 grants for home improvement or down payments. The grants will be made to qualifying residents who can show they lived in Evanston from 1919-1969 or were a direct descendant of an individual that lived in the area and suffered from discriminatory lending practices.

Evanston’s focus on housing is an excellent way to bring reparations to communities of color, who have suffered decades of discrimination and should be used as a blueprint for cities across the country. Too often the call for reparations begins and ends with reparations for slavery. While reparations for slavery are necessary to address the inequities in American society, they are only a beginning. Focusing on slavery ignores the century of institutionalized discriminatory practices that kept black and other minority Americans from achieving the most important source of wealth accumulation: home ownership (https://www.huduser.gov/publications/pdf/wealthaccumulationandhomeownership.pdf ) The Post-WW2 economic boom was helped in large part by the G.I. Bill which promised low-rate mortgages, low interest loans and education to those who fought in WW2. But black veterans who fought to end a holocaust in Europe faced their own holocaust when they returned home in the form of lynching and red lining when they tried to cash in on the benefits of the GI Bill (https://www.history.com/news/gi-bill-black-wwii-veterans-benefits). The newly minted Home Owners Loan Corporation (HOLC), began rating neighborhood with four grades  A: “Best”, B: “Still Desirable”, C: “Definitely Declining”, and D: “Hazardous”