Archie Sudue is the owner of The Mel Styles. A menswear store in Grand Rapids known for providing custom-fitted men’s suits. He says when the stay-at-home order was implemented in early March, order cancellations began rolling in.
“We had about ten weddings that’s already cancelled, prom season is cancelled, graduation is cancelled…so its just a lot…it’s a lot.”
Sudue employs less than 10 people and is sole proprietor. Sudue says he found out about the paycheck protection program loan right after it was launched in April 3rd and he submitted an application.
“I applied at least about eight to ten times with the PPP.”
Applications he filed with a number of banks, were denied repeatedly.
One of the formal guidelines from the Small Business Administration for implementing the Paycheck Protection Program stated that the funds would “prioritized underserved and rural markets.” And while $30 billion dollars from the PPP were set aside to help small business owners like Sudue, a new report from the Small Business Administration’s inspector general found that small businesses owned by people of color did not receive access to the loans in the same way their white counterparts did.
Jamiel Robinson founder of Grand Rapids Area Black Business, a start-up economic development company, says he’s not surprised by the report’s findings.
"All you have to do is look at how traditional lending from financial institutions, banks and credit unions, have historically left out businesses even pre COVID crisis, and so its not surprising the system is still going to function and operate the same way."
Businesses of color account for 30% of all businesses, and contribute 7.2 million jobs and $1.38 trillion dollars in revenue to the economy but according to a report from the Center for Responsible Learning. According to data from the U.S. Census Bureau in the Grand Rapids area, businesses owned by people of color account for 30% of all businesses and contribute $1.6 million dollars in revenue to the economy.
Because the paycheck protection plan loans can only be accessed through banks and small business lenders who are already lending to their existing customers minority-owned businesses without these relationships are more often left out.
Guillermo Cisneros, the executive director of the West Michigan Hispanic Chamber of Commerce, says the data from the SBA report matches what he is seeing local businesses owned by Latinos in the area.
“A high percentage of Latinx businesses don’t have bank relationships, and this is due to several reasons. In Latin America you are able to operate with cash so many people don’t trust the banks and when they come to the United States they try to continue with the same practices not knowing that affects greatly their outcomes here because if you don’t have a credit here in the United States you are not able to survive as a business owner.”
That was the case for Mireya Correa. Even though she’s been able to operate successfully Mireya Beauty and Grooming in Wyoming, Michigan for the last six years, when COVID-19 forced her business to close she had a hard time finding information on relief programs she could access.
“Pues nosotros verdad no sabes muchas veces como llenar las formas, todo esto es muy confuso entonces.. Osea que esta fregado esta todavia más fregado si me entiendes?”
“Well we don’t know how to fill out those forms and its all very confusing. Its hard for anyone but even much harder for us.”
After learning that most of the loans from the PPP went to big corporations instead of small businesses Correa decided not to apply to the program thinking her application would be denied. And her assessment matches the report from the Center for Responsible lending that states businesses of color stand close to no chance of receiving a PPP loan through a mainstream bank or credit union.
Robinson, again from the Grand Rapids Area Black Business, says he thinks this is because there was a lack of intention from banks to prioritize small businesses owned by people of color.
“I spoke with a couple financial institutions then who were really looking to get their money out to some of their bigger clients and we know on average that Black businesses have revenues of less than $100,000 dollars a year so it doesn't necessarily put us on the top of mind.”
According to the Center for Responsible Lending the answer for helping businesses owners like Sudue and Correa survive the pandemic lies in requiring that lenders issue 20% of their loans under the expanded PPP to business of color as well as opening the program to all small businesses that filed 2018 or 2019 tax returns.
But for now, Sudue has had to let go of his ten employees, and Correa, who furloughed the rest of her staff is using her savings to pay for her salon’s rent. Both are still hoping for a program that helps businesses like theirs out, but neither say they’re hopeful it will happen soon.