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PPP Lending Disparities by Race in 2020 and 2021

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.