They didn’t pay a hitman with the cash. Why aren’t more minority PPP loans in Miami being forgiven? | Editorial

There have been headline-making abuses of federal Paycheck Protection Program loans in South Florida, known for years as the fraud capital of the nation.

There was the woman who allegedly used a $15,000 PPP loan to hire a hitman to kill a Miami federal airport officer. A man who, after his South Florida moving businesses got almost $4 million in PPP money, used some of those taxpayer dollars to buy a $318,000 Lamborghini Huracan Evo, according to prosecutors. A North Miami couple who lied when they claimed to be farmers, despite living in suburbia, to get hundreds of thousands of dollars in PPP money.

But despite all the bad actors, PPP loans were a lifesaver for a lot of small businesses.

And most of the loans have been forgiven, which was always the plan. The lending program, created by Congress in 2020 to help small businesses weather the pandemic-induced financial crisis, was designed so that companies wouldn’t have to repay the money as long as they used it for payroll or certain other expenses, such as rent or debt or utilities. All they had to do was apply for loan forgiveness.

But now, according to a Miami Herald analysis, it turns out that PPP loan forgiveness isn’t exactly equal.

In Miami-Dade County, loan forgiveness rates in predominantly Black or Hispanic ZIP codes are significantly lower than those for predominantly white areas, the Herald found after analyzing data from the Small Business Administration.

Among the lowest

In majority-Black ZIP codes, the percentage of unforgiven loans is more than three times higher than in white ZIP codes. In majority-Hispanic ZIP codes, it’s more than double. And in Miami-Dade and Broward counties, with significant Black and Hispanic populations, forgiveness rates are among the lowest in the country.

That’s troubling. And, unfortunately, not all that surprising.

There’s evidence of bias from the start of the program. According to researchers at the National Community Reinvestment Coalition, a group that advocates an end to discrimination in housing, lending and business, white prospective borrowers were more often encouraged to apply for a loan than Black prospective borrowers. (In April and May of 2020, the organization sent white and Black prospective borrowers, in similar financial situations, to banks to ask about the loans.) Additionally, women were given less information than men.

Anneliese Lederer, director of fair lending and consumer protection at the NCRC, called it “blatant discrimination.”

And there’s one other factor. Some of the problems may be due to another issue that minorities seeking loans have often faced: built-in bias in the lending world. Banks were initially encouraged to work with their current customers to finance PPP loans, but that meant it was tougher for women- and minority-owned businesses, who already often struggle to get credit.

Many turned to online banks. And that’s where much of the problem lies now, the Herald said. Most of the borrowers still seeking forgiveness in majority-Black and majority-Hispanic areas got loans from online lenders.

Yes, PPP loans have been abused by some — and in eye-popping ways. But that’s not what we’re talking about here. Minority-owned businesses in this community turned to the federal program in good faith to help them through COVID, just like so many other white-owned businesses. And they have every right to expect that they would be forgiven at the same rate.

The federal government started this program two years ago. It’s time for the federal government to see it through.