The Paycheck Protection Program (PPP) was widely criticized, for favoring white-owned businesses over Minority Business Enterprises. (MBE) In the study PPP loans were consolidated using the program Stata using data only for North Carolina and included data sets for loans under and over $150K. In the first round of loans the racial demographics matched the business demographics of the Census for North Carolina, except that Asians were overrepresented and Whites were slightly underrepresented. However, there were extreme disparities in the amounts given to white owned business and some of the MBEs even after considerable controls where introduced. Along with race the study also controlled for the number of jobs a business had, whether they were female-owned, or if they were in a rural area, a non-profit or a specially designated HUBZone set by the SBA (Small Business Administration). The model also tested whether the business owner was Hispanic, as there is some evidence to show that Hispanics were discriminated against in the PPP loan process. However, our model shows that in North Carolina any differences are not statistically significant.
However, the model from Table 1 shows that in 2020 despite having the same number of employees, living in same area, being the same gender, and not living in a designated HUBZone a white owned business would have received an average of $15,000 more than a black-owned business and almost $21,000 more than an Asian-owned business, which are statistically significant at the less than 1% level. The chart and table from 2021 show considerable improvement over loan amount disparities. In the 2021 data white-owned businesses are underrepresented and the other races are overrepresented, which compensates for the disparities in the previous year. According to Table 2, Black-Owned businesses do not receive an average loan that is statistically significantly lower than white-owned businesses and Asian owned business received an average of $7,389 less than white owned business that is still an improvement over the near average $21,000 lower amount they received last year even when taking into consideration loan amounts were about half of what they were last year in N.C. Still much needs to be done to address. racial disparities on all fronts.
In order to determine whether Paycheck Protection loans in the North Carolina, suffered the same disparities between gender and race, as we found in our previous articles for 2020 PPP data. PPP loans were aggregated to include only North Carolina and included loan over and under 150K. In months that PPP were available in 2020, the disparities were much greater for loans given to male-owned businesses and women-owned businesses and were equivalent to amount of loans given between male and female owned business, however male owned businesses were awarded significantly higher loan amounts than female owned businesses. The demographic count almost doubled for gender between the two years, with the loans given in 2020 had close to 39% of loan applicants responding to the gender question, while 2021 had around to 78% responded as female owned businesses rate. Surprisingly, there were very few disparities between the loans given out in 2020 between male and female owned businesses and female businesses were overrepresented in the 2021 when compared to the overall business demographics of the North Carolina.
According to the most recent Census data that includes both Employer and Employer data statistics. The 2017 Census showed that female owned businesses made up 38.94% and male owned businesses made up 54.70% of Employer and Non-Employer businesses (percents do not add up to 100% because the Census includes equally/male and female owned as a separate category).
Male-owned businesses still received significantly more loans than female owned businesses. According to Model 1 in Table 1 below, male-owned businesses received and average of $6,759.96 more than female owned businesses, which is statistically significant at the five percent level. The model accounts for numerous factors that would affect loan amounts. The first and most important is jobs, the more jobs a business employee the more they will need to protect their employees’ paychecks and borrow more money. As the model shows for each employee a business reports they receive on average of $6,940.99, which is significant at less than the one percent level. Controls for race where also added which have been shown in many studies have shown that race has been shown to affect loan amount. Non-Profits, businesses in rural areas, and areas specifically designated as Historically Underutilized Zone (HUBZone). These controls were added to show that even when we disregarded the number of jobs a business employs, the race of the business owner, whether they are in an urban or rural area, or whether they are in a designated HUBZone female owned businesses still receive significantly less loan amounts than male-owned businesses.
Moreover, while the charts and the tables may show significant improvement in the amount of loans given when we did deeper the picture tells a different story. According to Model 1, in 2020 data male-owned businesses are given and average of $6756.96 more than female-owned businesses, while in the 2021 data male-owned businesses are given an average of $3301.50 more than female-owned businesses. So, male-owned businesses received around 2.05 times more than female-owned businesses when adjusting for controls. However, when looking at the mean amounts of total loans given, we see that in 2020 the average loan was $95,770 and in 2021 the average loan given was $40,266. Therefore, the average loans that were given in 2021 were 42% less than the average loan given in 2021. This means that the disparities between PPP loans given to male owned businesses and female owned businesses were about the same between the two years and may have been worse in 2021.
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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.
Female business owners were likely even more underrepresented than the data suggests.
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.
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.