indicationwww.07ppp.com

1INTRODUCTIONTheCOVID-19pandemichasexposedacuteanddeep-rootedconnectionsbetweenphysicalandeconomichealth.
Manyofthesameplaceshithardestbythepandemicarereelingconcurrentlyfromthehealthcrisis,businessclosures,andjoblosses.
Thesecommunitiesaredisproportionatelycommunitiesofcolor.
1Theeffectsofthepandemiconsmallbusinessesamidforcedclosings,modifiedre-openings,andweakeneddemand,arewelldocumented.
Nationallyrepresentativedataonsmallbusinessesindicatethatthenumberofactivebusinessownersfellby22percentfromFebruarytoApril20202,3—thelargestdroponrecord.
Whiletheoveralldeclineisnoteworthy,differencesamongclosureratesacrossracialandethnicgroupsareevenmorestriking.
Blackbusinessesexperiencedthemostacutedecline,witha41percentdrop.
4Latinxbusinessownersfellby32percentandAsianbusinessownersdroppedby26percent.
Incontrast,thenumberofwhitebusinessownersfellby17percent.
5ThisbriefexaminesreasonswhyBlackfirmshavebeenalmosttwiceaslikelytoshutterassmallfirmsoverall.
6WedrawonepidemiologicaldataonCOVID-19cases,Censusdataonbusinesslocations,dataonthegeographicreachofthePaycheckProtectionProgram(PPP),anddataonsmallfirms'finan-cialhealthfromtheFederalReserve'sSmallBusinessCreditSurveytoexamineconnectionsbetweenCOVID-19incidence,policyinterventions,andbusinesssurvivalrates.
7Overall,wefind:VolumesofCOVID-19casescoincidewithBlack-ownedbusinesslocations:two-thirdsofcountieswithhighlevelsofBlackbusinessactivitypre-COVID-19areinthetop50COVID-affectedareas.
DatafromcountiesnationwideshowBlack-ownedfirmsaremorelikelytobelocatedinCOVID-19hotspots,where-aswhite-ownedfirmsarelesslikelytobeinthemostheavilyaffectedareas.
1Seeforexample:https://www.
cdc.
gov/coronavirus/2019-ncov/need-extra-precautions/racial-ethnic-minorities.
html;https://www.
aha.
org/testimony/2020-05-27-testimony-disproportionate-impact-covid-19-communities-color;https://www.
mckinsey.
com/industries/public-sector/our-insights/covid-19-investing-in-black-lives-and-livelihoods;https://www.
nytimes.
com/interactive/2020/07/05/us/coronavirus-latinos-african-americans-cdc-data.
html.
2RobFairlie,2020.
TheImpactofCovid-19onSmallBusinessOwners:EvidenceofEarlyStageLossesfromtheApril2020CurrentPopulationSurvey.
NBERWorkingPaperNo.
27309.
Availableat:https://www.
nber.
org/papers/w27309.
3DatafromtheU.
S.
CensusBureau'sCurrentPopulationSurveyindicatethatthedeclinewasunevenacrossstates,withhardesthitareaslikeCA(27%drop),MI(33%drop),NV(35%drop),andNY(36%drop)experiencingsteeperdeclines.
Incontrast,stateslikeKS(2%drop),ME(2%drop),andTN(0%change)sawverylittlechangeinactivebusinessownership.
4U.
S.
black-ownedsmallbusinessesarehighlyconcentratedinretail,restaurants,andotherserviceindustriesmostaffectedbyshutdownsandsocialdistancing.
Seehttps://www.
reuters.
com/article/us-usa-economy-blackbusiness/why-some-black-owned-u-s-businesses-are-hardest-hit-by-coronavirus-shutdowns-idUSKBN23N34A.
5RobFairlie,2020.
TheImpactofCovid-19onSmallBusinessOwners:EvidenceofEarlyStageLossesfromtheApril2020CurrentPopulationSurvey.
NBERWorkingPaperNo.
27309.
Availableat:https://www.
nber.
org/papers/w27309.
6Seehttps://www.
reuters.
com/article/us-usa-fed-smallbiz/fed-hoped-to-skirt-a-second-virus-wave-small-businesses-may-sink-in-it-idUSKCN24P139.

Certainly,manyclosurestodatehavebeentemporaryandownersmaydecidetoreopenwhenconditionsimprove.
Nonetheless,differentialclosurerateshighlightdifferentialvulnerabilitiesacrosscommunitiesandsegmentsofbusinessowners.
7Weusecounty-leveldatawhenpossible,butalsoexaminestateandnationaldifferencesforsomemeasures,suchasmonthlybusinessclosuresandfinancialhealthwhenmoregranulardataarenotavailable.
DOUBLEJEOPARDY:COVID-19'SCONCENTRATEDHEALTHANDWEALTHEFFECTSINBLACKCOMMUNITIES1ReleasedAugust2020ByClaireKramerMills,Ph.
D.
,AssistantVicePresidentandJessicaBattisto,SeniorAnalyst2ThePaycheckProtectionProgram,thefederalgovernment'ssignaturereliefprogramforsmallbusi-nesses,hasleftsignificantcoveragegaps:theseloansreachedonly20%ofeligiblefirmsinstateswiththehighestdensitiesofBlack-ownedfirms,andincountieswiththedensestBlack-ownedbusinessactivity,coverageratesweretypicallylowerthan20%.
8,9Weakercashpositions,weakerbankrelationships,andpreexistingfundinggapsleftBlackfirmswithlittlecushionenteringthecrisis:eventhehealthiestBlackfirmswerefinanciallydisadvantagedattheonsetofCOVID-19.
BLACKBUSINESSACTIVITYISGEOGRAPHICALLYCONCENTRATEDBlackbusinessactivityisgeographicallyconcentratedintheU.
S.
andiscorrelatedwithBlackpopulationdensity.
10ResearchshowsthatBlackpopulationsaretypicallyclusteredinmetropolitanhubs11andthenumberofcitiesthataremajority-Blackhasgrownoverthepastdecade.
12FortypercentofreceiptsfromBlack-ownedbusinessesareconcentratedinjust30counties,roughlyonepercentofallcountiesinthecountry.
Examiningthesame30counties,13wefindthatroughlytwo-thirds(19of30)areareaswiththehighestnumbersofCOVID-19cases.
14GiventhehighgeographicconcentrationoffirmactivityandtheBlackpopulationingeneral,businessdisruptionsintheseparticularplacescanhaveoutsizedeffectsonAfricanAmericanwell-beingatlarge.
15COVID-19CASESCOINCIDEWITHBLACKBUSINESSLOCATIONSAbroaderanalysisofcountiesacrosstheUnitedStatesshowsacorrelationbetweenBlackbusinessdensityandCOVID-19incidence.
Figure1displaystheshareofbusinessesinacountythatareBlack-ownedandCOVID-19casesper1,000residentsthroughtheendofJune.
ThereisapositiverelationshipbetweenCOVIDincidenceandtheshareofacounty'sbusinessesthatareBlack-owned,anindicationthatareaswithhigherconcentrationsofBlackbusinessesaremorelikelytobefacinglargerdirect(longerforcedclosures,COVID-19symptoms)andindirect(socialdistancing,fewercustomers)effectsofthepandemic.
168AnnelieseLedererandSaraOros,2020.
LendingDiscriminationwithinthePaycheckProtectionProgram.
NationalCommunityReinvestmentCoalition.
Availableat:https://www.
ncrc.
org/lending-discrimination-within-the-paycheck-protection-program/.
9ThisfigureisconsistentwithtestimonyfromRonBusby,PresidentoftheU.
S.
BlackChamberofCommerce,whoreportedthat70%ofhismemberswhoappliedforPPPloansweredenied.
Seehttps://www.
sbc.
senate.
gov/public/_cache/files/c/a/caab6b6f-cbe1-44c0-b804-21a3158c1d9b/5293D75005E736363CB2A4D75DF67335.
busby-testimony.
pdf.
10Thecorrelationcoefficientbetweentheshareofacounty'spopulationthatisBlackandtheshareofacounty'sbusinessesthatareBlack-ownedis0.
94.
(Sources:U.
S.
CensusBureau,2014-2018AmericanCommunitySurvey&2012SurveyofBusinessOwners.
)Whilethetotalnumberofemployerfirmsgrewbetween2012and2017from5.
4millionto5.
7million,theshareofBlack-ownedemployerfirmsroseonlymarginallyfrom2.
0%to2.
2%.
(Sources:U.
S.
CensusBureau,2012SurveyofBusinessOwners&2017AnnualBusinessSurvey.
)11https://usa.
ipums.
org/usa/resources/voliii/pubdocs/2010/2010%20Census%20Briefs/c2010br-06.
pdf(SeeFigures6&7).
12DavidHarshbargerandAndreM.
Perry,2019.
TheRiseofBlack-MajorityCities.
TheBrookingsInstitute.
Availableat:https://www.
brookings.
edu/research/the-rise-of-black-majority-cities/.
13U.
S.
CensusBureau,2012SurveyofBusinessOwners.
14John'sHopkinsUniversityCoronavirusResourceCenter,Top50ConfirmedCasesbyCounty(updatedJuly52020).
15TheU.
S.
unemploymentrateforMay2020was13.
3%.
Amongthetotallaborforceinthe30countiesthataccountfor40%ofallBlackbusinessreceipts,theunemploymentratewas15.
7%.
Source:BureauofLaborStatistics:Laborforcedatabycounty,notseasonallyadjusted,April2019-May2020(preliminary;publishedJune26,2020).
16Thecorrelationcoefficientforthisrelationshipis0.
30.
3FIGURE1COVID-19INCIDENCEVERSUSBLACK-OWNEDFIRMSHAREFORU.
S.
COUNTIESShareofFirmsthatareBlack-Owned0%180%140%100%60%20%10%20%30%40%50%60%70%80%90%ConrmedCovidCasesper1,000Residents(asof30June)Sources:U.
S.
CensusBureau,2012SurveyofBusinessOwners;U.
S.
CensusBureau2014-2018AmericanCommunitySurvey;USAFacts:KnownCases(https://usafacts.
org/visualizations/coronavirus-covid-19-spread-map/;updated26July2020)ToprobewhethertheremightbeageneralconnectionbetweenbusinessactivityandCOVID-19casesthatisnotspecifictoBlackbusinesses,wealsoplotwhitebusinessdensityandCOVIDincidenceinFigure2.
Therelationshipisnegative(withacorrelationcoefficientof-0.
36),meaningthatareaswithhighersharesofwhite-ownedfirmstendtohavelowersharesofCOVID-19cases.
FIGURE2COVID-19INCIDENCEVERSUSWHITE-OWNEDFIRMSHAREFORU.
S.
COUNTIESShareofFirmsthatareWhite-Owned0%180%140%100%60%20%10%20%30%40%50%60%70%80%90%100%ConrmedCovidCasesper1,000Residents(asof30June)Sources:U.
S.
CensusBureau,2012SurveyofBusinessOwners;U.
S.
CensusBureau2014-2018AmericanCommunitySurvey;USAFacts:KnownCases(https://usafacts.
org/visualizations/coronavirus-covid-19-spread-map/;updated26July2020)4LIMITEDPAYCHECKPROTECTIONPROGRAMREACHThegeographicconcentrationofBlack-ownedfirmsandheightenedincidenceofCOVID-19casesinthesesamegeographieshasimplicationsforhowreliefprogramscanbestreachcommunitiesatrisk.
PPPOverviewThePaycheckProtectionProgram(PPP)allocatedsignificantfederalfundsfortemporaryrelieftosmallfirms.
Importantly,bothfirmswithemployeesonpayroll(employerfirms)andthosewithoutpayrollemployees(nonemployerfirms)wereeligible,withapplicationsopentoemployerfirmsonApril3andnonemployerfirmsonApril10.
Inclusionofnonemployerfirmsintheprogramwassignificant,sincethesefirmsrepresentroughly80%ofallsmallbusinessesand96%ofBlack-ownedbusinesses.
17ThefirstroundofPPPallocated$349billionforforgivablegovernment-guaranteedloanstosmallbusi-nessestocovercostsrelatedtopayroll,salaries,andbenefits,aswellasutilities,andmortgageandrentpayments.
TheprogramwasoversubscribedbyApril16.
Tomeetthesignificantandunmetdemand,lawmakersauthorizedasecondallocationof$310billionfortheprogramlaterthatmonth,andtheSmallBusinessAdministration(SBA)startedapprovingloansagainonApril27.
Intotal,betweenAprilandJune,nearly5,500lendersdistributed$521billionintheformof4.
9millionloanswithanaverageloansizeof$107,000.
AccordingtotheSBA'sestimates,theseloanswenttosmallbusinessesthatsupportedover51millionjobsnationwide,or84%ofthenation'ssmallbusinesspayroll.
18RecentanalysisofthegeographicdistributionofPPPloans,however,showsthataidhasnotreachedmanyifnotmostofthehardesthitareas.
19Forexample,researchfromtheNewYorkFedandtheUniversityofChicagofoundthatloansfromthefirstroundofPPPwerenotcorrelatedwiththenumberofCOVID-19casesinastate.
Instead,morelikelyreasonsforbusinessesreceivingtheseloansincludedhavingapriorbankingrelationshipaswellascommunitybanks'marketshare.
ArecentpaperfromTheBrookingsInstitutionalsoshowssignificantvariationinPPPcoverageacrossmetroareas,withremainingcoveragegapsforthehardesthitmetros.
20ADeeperLookatPPPCoveragebyCountyLookingatPPPloanreachthroughJune2020,wecontinuetoseecoveragediscrepancies.
Weexaminecounty-levelcountsofPPPloansforaconsistentcomparisonwithCOVID-19casecountsandBlack-ownedbusinessreceipts.
Inthe30countieswenoteasparticularlyvulnerabletotheeffectsofBlackbusinessclosures,mostcountieshaveseenabout15%-20%oftheirtotalbusinessesreceivePPPloans.
Figure3showsthisdataforthetop10countiesbyBlackbusinessreceiptsize.
Thenumberoffirms("totalfirms")includesbothemployerfirmsandnonemployers,sincebothtypesofsmallbusinesseswereeligibleforPPP.
17U.
S.
CensusBureau,2012SurveyofBusinessOwners.
18SmallBusinessAdministration.
PaycheckProtectionProgram(PPP)Report:ApprovalsthroughJune30,2020.
Availableat:https://www.
sba.
gov/sites/default/files/2020-07/PPP%20Results%20-%20Sunday%20FINAL.
pdf.
19HaoyangLiuandDesiVolker,LibertyStreetEconomicsblog(https://libertystreeteconomics.
newyorkfed.
org/2020/05/where-have-the-paycheck-protection-loans-gone-so-far.
html);andUniversityofChicago,BFIWorkingPaper(https://bfi.
uchicago.
edu/working-paper/did-the-paycheck-protection-program-hit-the-target/).
20JosephParillaandSifanLiu,2020.
Acrossmetroareas,COVID-19reliefloansarehelpingsomeplacesmorethanothers.
TheBrookingsInstitution.
Availableat:https://www.
brookings.
edu/blog/the-avenue/2020/07/14/across-metro-areas-covid-19-relief-loans-are-helping-some-places-more-than-others/.
5TheaveragecoverageratesshowninFigure3arenottoodifferentfromthenationalbusinesscoverageestimateforPPPloansof17.
7%.
21However,thereissignificantvariationacrosscounties.
Ofnote,amongthetop30counties(measuredbyBlackbusinessreceipts)only7%offirmsinBronx,NY;11.
3%offirmsinQueens,NY;11.
6%offirmsinWayneCounty,MI;and12.
2%offirmsinPrinceGeorge'sCounty,MDreceivedPPPloans.
22FIGURE3PPPLOANCOVERAGEINTOP10U.
S.
COUNTIESBYBLACKBUSINESSRECEIPTSCountyTotalblack-ownedfirms(2012)Totalnumberoffirms(2012)TotalnumberofPPPloans(throughJune2020)PPPfirmcoverage(PPPloans/Totalfirms)LosAngelesCounty,CA81,5631,146,701176,43415.
4%CookCounty,IL110,155549,68684,25615.
3%HarrisCounty,TX71,564438,79370,05816.
0%PrinceGeorge'sCounty,MD45,11577,2049,42012.
2%WayneCounty,MI59,706151,74617,61011.
6%DistrictofColumbia,DC22,09763,40812,48419.
7%FairfaxCounty,VA8,832115,91717,92115.
5%Manhattan,NY24,859315,39961,68719.
6%FultonCounty,GA44,574125,74526,18920.
8%Miami-DadeCounty,FL51,285468,18570,44715.
0%County-levelPPPloancountsarecalculatedbasedonaggregatedzipcodedata.
Incaseswherezipcodesmatchtomultiplecounties,thecountywiththehighestshareofthatzipcode'sbusinessaddressesisused.
Sources:U.
S.
CensusBureau,2012SurveyofBusinessOwners;U.
S.
DepartmentoftheTreasury,SBAPaycheckProtectionProgramLoanLevelData(throughJune2020).
WEAKERFINANCIALCUSHIONANDWEAKLONGER-TERMBANKINGRELATIONSHIPSThecoincidenceofthesecoveragegaps,alongwithalargesumofremainingPPPdollars—morethan$130billionremainsavailablethroughAugust8th—presentsapuzzleaboutwhyBlackfirmsarenotaccessingPPPloans.
OneconsiderationisthatalargenumberofBlackfirmsenteredthecrisisinaweakenedpositionandmayhavebeenreluctanttoapplyforaPPPloangivenuncertaintyaboutfutureactivity.
Thereissomeevidencetosuggestthisplayedarole.
WefindthatBlackemployerfirmswerelesslikelytoenterthepandemicfromastrongfinancialpositionthanwhite-ownedfirms,withsmallersharesofBlackfirmsoperatingataprofit,havingahighcreditscore,andusingretainedbusinessearningstofundthebusiness.
23AsshowninFigure4,42%metatleasttwoofthesecriteria,comparedto73%ofwhiteemployers.
21Basedonatotalof27,626,360firmsintheU.
S.
and4,885,388PPPloansmadethroughJune2020.
Forconsistencywithcounty-levelfirmestimates,theU.
S.
totalfirmcountisfromthe2012SurveyofBusinessOwners.
22SeeDataAppendixfordetailedinformationaboutPPPloancoverageinthetop30U.
S.
countiesbyBlackbusinessreceipts.
23Thisfindingisconsistentwithrecentresearch.
DianaFarrell,ChrisWheat,andChiMac.
2020.
"SmallBusinessOwnerRace,Liquidity,andSurvival.
"JPMorganChaseInstitute.
Availableat:https://institute.
jpmorganchase.
com/institute/research/small-business/report-small-business-owner-race-liquidity-survival.
6FIGURE4FINANCIALHEALTHSPECTRUM(PRE-PANDEMIC)FORWHITE-ANDBLACK-OWNEDEMPLOYERFIRMSSource:FederalReserveBanks,2019SmallBusinessCreditSurvey.
Asecondimportantconsideration,however,isthatmostBlackownedfirmslackstrongbankrelationships.
InthelatestReportonEmployerFirmsbasedontheFed's2019SmallBusinessCreditSurvey,wefoundthatfewerthan1in4Black-ownedemployerfirmshasarecentborrowingrelationshipwithabank.
24Thisnumberdropsto1in10amongBlacknonemployerfirms,comparedwith1in4white-ownednonemploy-ers.
25ItisimportanttonotethesefundinggapsarenotduetodifferentialratesinBlackfirmsapplyingforfinancing.
Infact,recentsurveyevidenceindicatesthatBlack-ownedfirms—bothemployerandnonemploy-er—applyforfinancingatequalorhigherratesthanwhite-ownedfirmsbutaredeniedathigherrates.
26Blackbusinessownersarealsomorelikelythanwhiteownerstoreportbeingdiscouraged,ornotapplyingforfinancingbecausetheybelievetheywillbeturneddown.
AmongBlackemployerfirms,37.
9%reportedbeingdiscouraged,comparedto12.
7%ofwhite-ownedfirms.
27Perceivingahigherprobabilityoffundingsuccessfromonlinelenders,Black-ownedemployerandnonemployerfirmsarerelativelymorelikelytoturntoonlineprovidersforfunding.
28FintechproviderswerenotinitiallyauthorizedtolendPPPfundsthoughtheycollectivelydispersed$4.
7billioninfundsthroughJune30th.
29Firmfinancialhealthcertainlyplaysanimportantroleintheabilitytoaccessbankfinancing.
However,racialgapsinbankingrelationshipsexistamongthefinanciallyhealthiestfirms.
Whencontrollingforjustthosefirmsthatarehealthyorstable,wecontinuetoseesizabledifferencesbetweenBlack-andwhite-ownedfirmsinbankfunding.
Evenamongthefirmsthatshouldnothavemajordifficultiesaccessingcreditfromabank(giventheirbusinessperformanceandcreditworthiness),Black-ownedemployersweremuchlesslikelytohaveobtainedbankfinancinginthepastfiveyears,insteadrelyingmostcom-monlyonpersonalsavingsorfinancingfromfamilyandfriends.
Figure5showsthat54%ofhealthyorstablewhiteemployershaveanexistingbankingrelationship,comparedto33%ofhealthyorstableBlackemployers.
Thisfindingindicatestherolethatfactorsbeyondfirms'financialhealthplayinaccessingmainstream—andaffordable—financing.
24FederalReserveBanks,ReportonEmployerFirms,2020.
Availableat:https://www.
fedsmallbusiness.
org/survey/2020/report-on-employer-firms.
25FederalReserveBanks,2019SmallBusinessCreditSurvey.
26AmongBlack-ownedfirms,28%ofnonemployersand54%ofemployersappliedforfinancinginthelast12months,comparedto45%ofwhiteemployerfirmsand25%ofwhitenonemployers.
SeeFederalReserveBanks,ReportonEmployerFirms,2020.
Availableat:https://www.
fedsmallbusiness.
org/survey/2020/report-on-employer-firms,andFederalReserveBanks,ReportonNonemployerFirms,2019.
Availableat:https://www.
fedsmallbusiness.
org/survey/2019/report-on-non-employer-firms.
27FederalReserveBanks,ReportonEmployerFirms,2020.
Availableat:https://www.
fedsmallbusiness.
org/survey/2020/report-on-employer-firms.
Seealso:UnidosUSandColorofChange,,2020.
"FederalStimulusSurveyFindings.
"PreparedbyGlobalStrategyGroup.
Availableat:https://theblackresponse.
org/wp-content/uploads/2020/05/COC-UnidosUS-Abbreviated-Deck-F05.
13.
20.
pdf.