Congress spent hundreds of billions of dollars to rescue small businesses hurt by the pandemic. But Paycheck Protection Program (PPP) money disproportionately went to White neighborhoods, leaving communities of color behind.
Small businesses are the heart of Los Angeles’ many neighborhoods. Reporter Laura C. Morel talks with business owners around Los Angeles who either received PPP money or faced insurmountable hurdles to get one of the forgivable loans. Morel talks with a Latinx barber in the Florence neighborhood, where just 10% of businesses got PPP loans. In a predominantly Black area of Inglewood, we meet clothing store owner Annie Graham, who couldn’t get a PPP loan last year, even from a lender who hooked up with Magic Johnson to specifically help minority- and women-owned businesses access the government lending program. In Graham’s neighborhood, 32% of businesses got PPP loans. Meanwhile, in the majority-White neighborhood of Playa del Rey, 61% of businesses got PPP loans. The disparity among neighboring communities is striking.
We end with an interview with reporter Gabriel Thompson about fast food franchises that received PPP money. One McDonald’s owner in Chicago got half a million dollars, but workers there filed multiple complaints with OSHA because they felt they were not protected from COVID-19.
This show is guest hosted by Sarah Gonzalez of Planet Money.
Dig Deeper
Read: Rampant racial disparities plagued how billions of dollars in PPP loans were distributed in the US
Credits
Reported by: Laura C. Morel, Mohamed Al Elew, Emily Harris, Lance Williams, Gabriel Thompson | Produced by: Emily Harris, Amy Mostafa, Jennifer Goren, David Rodriguez | Lead producer: Emily Harris | Edited by: Jennifer Goren, Taki Telonidis, Esther Kaplan, Soo Oh | Production manager: Amy Mostafa | Production assistance: Brett Simpson and Ameeta Ganatra | Digital producer: Sarah Mirk | Mixing, sound design and music by: Jim Briggs and Fernando Arruda | Special thanks: Aaron Glantz, Sarah Cohen, Avishay Artsy, Stan Alcorn and Anayansi Diaz-Cortes | Executive producer: Kevin Sullivan | Guest host: Sarah Gonzalez
Support for Reveal is provided by the Reva and David Logan Foundation, the John D. and Catherine T. MacArthur Foundation, the Jonathan Logan Family Foundation, the Ford Foundation, the Heising-Simons Foundation, Democracy Fund, and the Inasmuch Foundation.
Transcript
Reveal transcripts are produced by a third-party transcription service and may contain errors. Please be aware that the official record for Reveal’s radio stories is the audio.
Speaker 1: | Reveal is brought to you by Progressive one of the country’s leading providers of auto insurance. With Progressive name your price tool. You say what kind of coverage you’re looking for and how much you want to pay, and Progressive will help you find options that fit within your budget. Use the name your price tool and start an online quote today at progressive.com. Pricing coverage match limited by state law. |
Sarah Gonzalez: | From the Center for investigative reporting and PRX, this is Reveal. I’m Sarah Gonzales, one of the hosts of NPR’s Planet Money Podcast. I’m sitting in for Al Letson, who’s working on a new cereal from Reveal that you’re going to be hearing a lot more about in the weeks ahead. So I live in Los Angeles and one thing about LA is that even though all together, it is huge. It’s really just a bunch of little neighborhoods. |
Speaker 3: | I mean, I like everything about all around here because I’m from here. It’s where I grew up at. |
Sarah Gonzalez: | Andrea Bryant is from South LA. |
Andrea Bryant: | [inaudible]. |
Sarah Gonzalez: | She’s picking up takeout from John’s fish market there. It’s one of her favorite spots. |
Andrea Bryant: | This is the only place I eat my fish from. Their fish is really good. |
Sarah Gonzalez: | Andrea grew up about 10 blocks away. |
Andrea Bryant: | So this is an urban area like I said, Hispanics and blacks, everybody coexist. You gave me hot sauce, ketchup and tartar sauce? |
Sarah Gonzalez: | The person working at the counter is Sam cho. He hands Andrea her shrimp combo. |
Andrea Bryant: | Yeah. This place has got the best fish. |
Sarah Gonzalez: | Sam says the pandemic has scarred the neighborhood. |
Sam: | Yeah, I mean, it’s been influencing everybody you know. Like there were more than like five to eight fish markets now. But right now I think there’s only two or three survive after the COVID-19. |
Sarah Gonzalez: | This fish market may have survived because it got a helping hand early on from the Paycheck Protection Program or PPP. That’s the huge multibillion-dollar federal program designed to help small businesses stay alive through COVID. It started last April. |
Speaker 6: | Nearly $350 billion in loans will soon be available through lending partners to help small businesses meet payroll and other expenses for up to two months. These loans will be forgiven as long as businesses keep paying their workers. This includes sole proprietors and independent contractors. |
Sarah Gonzalez: | Sole proprietors and independent contractors are the smallest of small businesses. And there are 10s of millions of them in the United States. But much bigger businesses could get PPP money too. Companies with up to 500 employees or more in certain industries. With all the fear and uncertainty last April, everyone wanted some of this cash almost instantly. |
Speaker 7: | Now to the latest with the coronavirus pandemic- |
Sarah Gonzalez: | There wasn’t enough. |
Speaker 7: | Small businesses turning to the federal government for relief are out of luck. The loan program is out of money tonight. |
Sarah Gonzalez: | Nearly $350 billion ran out in just two weeks. Congress replenished the pot, added many more billions and eventually PPP loans went to millions of companies. Full disclosure Reveal got some of that money too to help get through the pandemic. Now Congress made it clear that this is not exactly a loan, it’s forgivable free money if you follow the rules. But access to this money was not equal. |
Sarah Gonzalez: | Today we’re going to travel one LA Avenue 10 miles from a city neighborhood to the beach. Along the way, we’ll see how businesses in black and Latinx neighborhoods fared far worse than those in white neighborhoods when it came to getting PPP money. Reveal’s Laura Morel investigates why they were left behind. |
Laura Morel: | I’d like to introduce you to a barber. |
Daniel Sanchez: | My name is Daniel Sanchez and I am owner of the Gio’s barber shop located on Manchester and Central. |
Laura Morel: | We’re about 10 miles east of the Pacific Ocean in LA’s Florence neighborhood. Its majority Latinx and Manchester Avenue is a main commercial strip. From the small homes with small yards off the side streets there are plenty of shops to walk to. Daniel’s barber shop sits between a furniture store and a used car lot. Because of COVID the door to his shop is often gated shut now. But the outside wall has a mural that makes you feel like you’re looking in. It shows two big red barber chairs and a man with a tidy trim. Daniel has wanted to run his own business since he was a kid. |
Daniel Sanchez: | I grew up always seeing my parents work hard and they work hard for what they own. So it made me get motivated to have my own business and own it and run it because you interact with the community. You see what’s going on around you and you get to meet new people. |
Laura Morel: | Manchester is a big busy street and he used to get a lot of walk-in business, not during COVID though. Over this past year, Daniel has cut way back on hours and cut a lot less hair. |
Daniel Sanchez: | The hair cuts were like not constantly coming in and it was only by appointment. I only have one person on the chair and one waiting for me and that’s about it. |
Laura Morel: | Daniel’s income went down. But like so many retail and service businesses that tried to stay open, his cost to stay safe went up. |
Daniel Sanchez: | Once you walk in the shop, I had to put hand sanitizers. If a person walked in without a mask, I had to give them a mask and wear mine. One for myself and my safety as well. I had to use capes so the hair won’t get on the client. I had to buy a whole bunch of them because I couldn’t use one for every person. |
Laura Morel: | Daniel did not get a PPP loan. According to government data, the car lot next to him did. So did a break shop around the corner and a children’s dentist a block away. But overall small businesses in this neighborhood did not get help from the PPP pool of money. |
Jesse Van Tol: | Banks were allowed just to serve their existing customer base. |
Laura Morel: | Jesse Van Tol heads the National Community Reinvestment Coalition, which focuses on fair lending. |
Jesse Van Tol: | This was a government program. We wouldn’t have said, you can only get your stimulus check, if you happen to have a banking relationship with a bank that’s going to offer a stimulus check. But that’s how the PPP program played out. And so what that meant was that the relief didn’t reach everyone. |
Laura Morel: | After that $350 billion disappeared so quickly, Congress started to investigate. A house subcommittee found that Treasury Department officials privately encouraged banks processing PPP loans to serve their current clients first. Some banks did that. Some even required PPP applicants to have a business checking account with them or a previous loan. The idea was to move money fast, but the subcommittee found that banks also knew this could exclude minority and women owned businesses. An internal City Bank documents spelled out that risk clearly. But the bank’s executives decided only to help existing customers get PPP money. Jessie says the system was set up to fail minority owned businesses. |
Jesse Van Tol: | Banks don’t serve minority small businesses to the extent that they should. There should have been a mandate to lend to non-customers, in addition to existing customers. |
Laura Morel: | Daniel the barber didn’t have a business banking relationship. He doesn’t trust banks. |
Daniel Sanchez: | Sometimes when you go to a bank and you talk to some person, some person wouldn’t want to help you because you’re a barber. You don’t put a lot of interest in it. |
Laura Morel: | And he didn’t want that. |
Daniel Sanchez: | I don’t like financial stuff and then you’re going bankrupt. I don’t want none of that. |
Laura Morel: | So he never even applied for a PPP loan. Daniel never got the message that PPP loans are actually designed to be forgiven, so he wouldn’t have had to pay it back. We used government data for a best estimate of the number of businesses in Daniel’s neighborhood. Then we counted the number of PPP loans that landed there. Just 10% of businesses in this Latinx majority area got PPP loans last year. How did other neighborhoods do? Let’s head west. |
Speaker 11: | 115. Welcome. Regular fare is 175. |
Laura Morel: | The 115 bus runs the whole length of Manchester Avenue. For five miles the bus passes chain restaurants, nail salons, small boutiques and repair shops. Most buildings are one story long and low like so much of LA. Manchester runs through Inglewood. It’s one of many small cities inside Metro LA. |
Speaker 12: | Thank you bus driver. |
Laura Morel: | At Manchester and Crenshaw, there’s a gas station on one corner and fast food restaurants on the other three. |
Speaker 13: | Okay. So a chilli cheese dog and a big Buford Burger by itself. Do you want anything else? |
Laura Morel: | This neighborhood is mostly black but the area’s gentrifying and increased rents put pressure on small businesses even before COVID. Last September the long plant SoFi Stadium opens in Inglewood. |
Speaker 14: | Home to the LA Rams and La charges. This revolutionary build cost over $5 billion making it the most expensive sports ground in the world. |
Laura Morel: | Not far from the stadium local shops line Manchester. |
Annie Graham: | And this one here is a barber and beauty shop that was new. It’s been here for maybe three years now. It wasn’t there before. The check cashing place has always been there, of course. |
Laura Morel: | Annie Graham knows this stretch of Manchester like the back of her hand. She’s giving my colleague David Rodriguez a tour. |
Annie Graham: | This section from there across Manchester all blacks own businesses here. So we all fight into help each other to stay in business. |
Laura Morel: | She stops in front of her own clothing store. There’s a tree by the entrance and in her windows you can see dresses on display. |
Annie Graham: | The name is not up there of course, but I got to get somebody to get the name. But it’s called the White House by Miss Annie. |
Laura Morel: | Did I say store? Miss and actually has four. They’re all in a row with connecting doors in between. The White House sells only white clothing, lace and ruffled dresses. Another shop has other fancy wear. And because people were staying home during COVID, she’s now selling home decor in her third and she sublets the last one. Miss Ann’s has been on Manchester for 15 years. |
Annie Graham: | I started out with just a little square at 2635 just a square. And I kept working hard and each time someone would move out I would just go over, go over, go over. So my plan is to go on down if anybody else move out, that’s my dream. |
Laura Morel: | I spoke to miss Ann’s several times over the past few months. On one phone call she told me about how she built her business. |
Annie Graham: | I came out here from Alabama when I graduated high school and went to college to be a school teacher. But I had a change of heart I decided to start picking up items that I thought would be of value to sale. Going around actually digging in trash from the beginning. Going to swap meets, going to Goodwill stores, going to garage sales to create a business for myself to have some kind of form of income. But I’ve never been employed by anybody since I came to California. I’ve always been my own boss. |
Laura Morel: | She’s had a lot of challenges, but nothing like COVID. |
Annie Graham: | When we had to close it’s just like I went into a rage because I was like oh my god, what are we going to do? It wasn’t just like, Oh, I got money stashed over here and a big old pile of money. And then they let us open back up again but we could only do outside and there’s no way I could do curve selling with my dresses. People have to try things on, women need to try things on. You can’t sell a woman a dress and say, “Oh this will fit you. That will look good on you.” No, that is not how it goes. |
Laura Morel: | She still has dresses she expected to sell for Easter and Mother’s Day last year. |
Annie Graham: | Actually I hate to say this but my main client has only been for funerals. So many people dying now and people shopping for funeral dresses for the person, you know the deceased as well. |
Laura Morel: | When COVID first shut down her shops, miss Ann applied for a government loan that’s been around for years. It’s for small businesses during emergencies. She was turned down. The rejection letter said unsatisfactory credit. She looked into applying for a PPP loan through her bank Wells Fargo. But the process was confusing and she worried about getting another no, so she held off until Magic Johnson got involved. |
Annie Graham: | Magic Johnson was offering business loans or grants for black or minority business women owners, right. |
Laura Morel: | Here’s how it worked. Starting last May one of Magic’s companies invested $100 million in a non-traditional lender called MBE Capital Partners. MBE used the money to make PPP loans until the government reimbursed them. Magic said on CNBC that he wanted to help small businesses that hadn’t gotten access to PPP loans through traditional banks. |
Magic Johnson: | They probably didn’t have a relationship with the banks when the stimulus package went out. So now we’re able to say, “Hey, you can have a relationship with us. You can keep your employees, keep your doors open.” And that’s what we want to do. Make sure that minority owned firms, women owned firms can stay open. |
Laura Morel: | His words resonated with Miss Anne. So she applied for a PPP loan through MBE. She asked her friends Michael Childress to help with the application. He’s an accountant. |
Michael Childre…: | So I helped her fill out the application and we applied. We submitted all the paperwork that they requested, tax returns, and so forth. |
Laura Morel: | MBE wrote back asking for a specific form to prove Miss Anne had staff on payroll. She didn’t have staff. 96% of black owned businesses in the US don’t. |
Michael Childre…: | So we’re not going to have that form and they never mentioned that you will need that form when you apply. So we wrote them back and we were like, So is there any other information that we can submit to you to get her approved and to no avail. |
Laura Morel: | Many small businesses never get big enough to afford having staff. It’s not the salary. It’s paying for things like payroll taxes or just payroll processing. Before COVID Miss Anne had About six people, mostly family working for her as independent contractors. But because of shutdowns and slowdowns, she can’t afford to pay them now. Here’s the thing, Congress urged the Small Business Administration to write guidance for lenders to prioritize underserved communities. But the SBA failed to do that for two and a half months. |
Annie Graham: | Yeah, we were left behind. Is as if they wanted us to lose our businesses or to struggle to make us give up. |
Laura Morel: | Miss Anne is black but no one knows the race of each business owner who applied for PPP. That’s because the SBA also initially failed to follow its own standard practice asking for demographic information. So we looked at the addresses of businesses that got PPP loans in LA and in big cities across the country. We found that majority white communities consistently benefited more than Latinx, black or Asian neighborhoods. In Miss Ann’s neighborhood, a law firm, a cafe, a laundromat and a property management company got PPP loans last year. But overall, just over 30% of businesses here got help from the program, just one in three. |
Speaker 11: | We just watch your stuff. |
Laura Morel: | We keep going west on bus 115 all the way to the beach. It becomes more residential and a bike lane creeps in before Manchester Avenue ends in Playa Del Rey. It’s a majority-white neighborhood tucked between a nature preserve and the airport, with its own couple miles of beach. |
Speaker 18: | Daddy I think it might be big enough. |
Speaker 19: | You think so? |
Speaker 18: | Yeah. |
Speaker 19: | You’re ready to get buried? |
Speaker 18: | Yeah. |
Joey: | I love the community in Playa del Rey. It’s a small town beach vibe and it’s just the best. |
Laura Morel: | Joey Enkeira runs an iconic burger joint a short stroll from the sand. It’s got a patio out back and a huge side with two palm trees. It looks like what it’s called the Shack. |
Joey: | The shack has been here since 1972. Everybody knows the Shack. You can go anywhere, you could be in Australia and you have a shack shirt on. They’re like I’ve been there. I’ve been there. Everybody’s been here. It has been part of the staples of the community for a long, long time. And people love it. I love it. |
Laura Morel: | In March the shack had to shut down because of COVID. In April the staff posted this video on Facebook. |
Speaker 21: | You’re live now Joey. |
Joey: | Hey, all of us at Shack love you. Somebody say something. |
Laura Morel: | It was a little awkward and hard to hear them. But one fan wrote in the comments. I hope you get one of those small business loans and survive. The Shack stayed closed not even doing takeout until finally in June. |
Joey: | Hey everybody, its Joey at the Shack and the Shack’s back. |
Laura Morel: | Until a month later when an employee got sick. |
Joey: | Yesterday at the Shack. It got real, real. |
Laura Morel: | Closed down two weeks for quarantine then opened again. |
Joey: | I’m calling our friends, family and customers this weekend to come out and support us. The struggle is real. |
Laura Morel: | According to small business administration data, the Shack got a $150,000 PPP loan last year. Joey doesn’t do the books. So when we talked with him, he didn’t know exactly what the money went to. But he knew it was real help right when his business needed it. |
Joey: | The PPP loans they saved us and of course the community. My customers are the best customers in the world. They showed up when I said I needed rent money there would be a line around the block ordering Shack burgers and I love them over that. |
Laura Morel: | Remember where we started the east end of Manchester Avenue. In a majority Latinx neighborhood where 10% of all businesses got PPP loans. Then we followed the road through majority black neighborhoods where about 30% of businesses got them. At the western ends of Manchester and white majority Playa Del Rey about 60% of businesses got loans from the Paycheck Protection Program last year. 60% twice as high as near Miss Ann and six times higher than Daniel’s neighborhood. All three communities are in LA. They’re just 10 miles apart along the same street but travel that street and you travel the distance between decent access to PPP help and close to none at all. This year the Shack applied for and received a second PPP check. Joey is still doing videos. |
Joey: | Hey everybody, it’s Joey at the Shack. Get your vaccine so we can get our party back on. Love you. |
Laura Morel: | And back in Inglewood we tried to figure out whether there was any way Magic Johnson’s partner MBE capital could help Miss Ann get a PPP loan even though she didn’t have staff. A few weeks ago MBE’s President Carra Wallace agreed to talk with me. She said MBE should have followed up with Miss Ann last year. |
Carra Wallace: | I would love to tell you that we gave excellent customer service to everybody, all 20,000 people. We’re a small business that are minority owned business ourselves but in this world of PPP. Yeah, we want the best. |
Laura Morel: | Still, MBE made PPP loans in majority black areas at three times the rate they did in majority white neighborhoods. And after Carra talked to me, she calls Miss Ann. By then Miss Ann had decided to try again. She reapplied with a new lender under new PPP rules this year. And help finally came through months after she first tried to get PPP assistance she received almost $15,000. |
Sarah Gonzalez: | Thanks to Reveal’s Laura Morel for bringing us that story. In Los Angeles alone, the disparities we found in PPP lending translate to potentially 79,000 businesses in Asian, black and Latinx neighborhoods missing out on emergency aid. Beyond Los Angeles, the disparities persist. Check out our interactive map at revealnews.org to see how your city did. And four out of five major US metros, majority white neighborhoods got more loans per business last year compared to neighborhoods with black, Latinax or Asian majorities. |
Speaker 23: | I mean, I have to say I’m not surprised. It makes me extremely upset but I’m not surprised. |
Sarah Gonzalez: | One fair lending activist wants to change the way banks do business. That’s next on Reveal. |
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Speaker 1: | Fate of Fact a new audio documentary from Shining City Audio, Jon Meacham and C13 Original Studio. Is available now on Apple podcasts, Spotify, Odyssey and wherever you get your podcasts. Reveal is brought to you by Progressive. One of the country’s leading providers of auto insurance. With Progressive’s name your price tool, you say what kind of coverage you’re looking for and how much you want to pay. And Progressive will help you find options that fit within your budget. Use the name your price tool and start an online quote today at progressive.com. Price and coverage match limited by state law. |
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Sarah Gonzalez: | From the Center for investigative reporting and PRX this is Reveal. I’m Sarah Gonzalez sitting in for Al Letson. Traveling Manchester Avenue through Los Angeles just now, we heard how the Paycheck Protection Program left communities of color behind. |
Paulina Gonzale…: | From the onset it was designed to fail a segment of the population. It was designed to run through banks. |
Sarah Gonzalez: | Paulina Gonzalez-Brito is executive director of the California Reinvestment Coalition, a bank watchdog group. Paulina says the PPP program is another example of banks excluding communities of color. Banks say they were responding to an unprecedented emergency with PPP. |
Speaker 26: | Bank of America was one of the first major banks, the first major bank to begin accepting applications. We reassigned 10,000 employees to work on the program and provided a quarter of a million loans in the first month of the program. |
Sarah Gonzalez: | So what went wrong? Reveal’s Emily Harris reports. |
Emily Harris: | Here’s Paulina Gonzalez-Brito’s short history of banks when it comes to communities of color. |
Paulina Gonzale…: | Banks have historically not served our communities and we’ve seen it throughout. Through redlining and through the subprime mortgage crisis. We’ve seen that has failed our communities time and time again. |
Emily Harris: | Redlining dates back to the 1930s. When banks used maps drawn by federal agencies to deny home loans in mainly black neighborhoods. The practice lasted for decades and to some degree continues today. In the subprime mortgage crisis, lenders did the reverse, offering easy loans on predatory terms. Black and Latinx people in particular lost their homes during that crisis. |
Paulina Gonzale…: | So when you have a crisis like COVID, like a pandemic, when you say, okay, we’re going to put together a recovery program and you run that recovery program through that same system, you’re going to see the same result. You’re not going to see an equitable recovery. |
Emily Harris: | The Community Reinvestment Act was supposed to address inequity in lending when it was passed more than 40 years ago. It says banks must meet the credit needs of people in all communities they serve, as long as that doesn’t go against sound banking practices. |
Julie Stackhous…: | Not just to people who happen to say be the wealthiest or have the strongest relationship. But to all consumers in that assessment area. |
Emily Harris: | Julie Stackhouse was a Federal Reserve vice president until retiring last year. She oversaw the regulators who are supposed to make sure banks are following that law. |
Julie Stackhous…: | You have an obligation, an affirmative obligation to make loans as well as take deposits. But it’s not quantified as to what that is. So that’s where the regulatory process comes into play. |
Emily Harris: | There’s a mix of ways that banks can meet what regulators are looking for. Advertised loans, make loans, give grants to community groups. Bank regulators have already decided that most PPP loans will count too. I understand we have about a half an hour, is that right? Is there any leeway on that? |
Dan: | Yes. |
Emily Harris: | I got on zoom with Dan Letendre, the Senior Vice President at Bank of America. The bank was the biggest PPP lender in 2020 by far. It processed about 340,000 loans. Roughly 50,000 more than anybody else. Dan heads a team at Bank of America. |
Dan: | With the sole mission of finding creative ways to increase access to capital in low income and minority communities. |
Emily Harris: | Dan told me that when the pandemic shut down businesses, the bank jumped in to help. Employees worked in shifts around the clock. I told him what we’d found in cities including Los Angeles, New York, Dallas and Miami, Bank of America’s PPP loans went to businesses in majority white communities about twice as often as in majority black or Latinx communities. Is this outcome okay to you? |
Dan: | So even before the emergency program began, we did recognize that the Paycheck Protection Program design would present challenges for many of our clients and in particular, for very small businesses. |
Emily Harris: | The vast majority of black and Latinx owned businesses are very small. Dan says Bank of America saw fewer applications for PPP loans from communities of color. He blames the Treasury Department and the Small Business Administration for how they wrote the rules. |
Dan: | When I go back to those frenetic days, the view was how does the economy or system get money to employees who can’t go to work and are therefore likely to be unemployed, which I think was valuable and important. I think that the unintended consequence was that the funding went to businesses that had employees and didn’t go as much to businesses that don’t have employees. And it is true that the smaller businesses that don’t have employees were more frequently present in minority communities and low income communities. So they did see less money. |
Emily Harris: | And I guess the question is, why is that still okay? Because across the board, everybody was facing the same uncertainty, the same dark days. Why is it okay to still leave out more businesses in black and Latinx communities than in white communities in 2020? |
Dan: | We didn’t design the program. I know the intentions of the program in its design, were to assist employees. |
Emily Harris: | The law that created PPP, though specifically said self employed people were eligible for PPP loans. The Small Business Administration declined an interview, a spokesperson said in an email that the new administration has made changes to ensure equitable distribution of PPP relief. So what does it mean for a small business to be left out of PPP? Cheryl Fears is the business manager of the Krushal Kiddz Dance Company in Los Angeles. |
Cheryl Fears: | I’m 72. I mean, I’m black. I’m just helping my granddaughter. |
Emily Harris: | Her granddaughter owns the studio. Cheryl says she couldn’t get a PPP loan for Krushal Kiddz when she applied last year through Bank of America, where she keeps the company accounts. She wound up getting a different kind of emergency loan from the government $21,000 that she says went straight to past due rent. But unlike a PPP loan, this is not forgivable, she has to pay it back with interest. |
Cheryl Fears: | First of all, 21,000 they gave me 30 years to pay it back. I’ll be dead and gone and my granddaughter will still be paying this loan back. |
Emily Harris: | JP Morgan Chase and Wells Fargo were also among the biggest PPP lenders nationally. Combined, they processed more than $39 billion worth of loans last year. And in major cities across the country their loans went to businesses in majority white communities persistently, more often than black and Latinx communities. Those banks wouldn’t agree to taped interviews. But a Wells Fargo spokesman told me the government paid the bank $420 million in fees for PPP lending last year and that all that money is going to a fund to help small businesses. Chase won’t say how much it earned in fees, but says the costs ate up any profits. And Dan at Bank of America said his bank gave cash and access to capital to help community based lenders make PPP loans. |
Dan: | If those loans don’t show up in Bank of America’s numbers those would be in the CDFI numbers. |
Emily Harris: | CDFI stands for Community Development Financial Institution. And nearly a quarter of them did make over half their PPP loans in communities of color. But their impact was so small that the program disparities overall stay the same. In the vast majority of cities with more than a million people. The rate of PPP lending in majority white communities was consistently higher than in black, Latinx or Asian communities. |
Emily Harris: | Right now, the Community Reinvestment Act says regulators have to grade banks on how well they meet the credit needs of low and moderate income areas. The Federal Reserve is asking how to change the rules to address systemic inequities specifically affecting communities of color. Stella Adams, a black business owner and a longtime advocate of equitable lending says it’s high time. |
Stella Adams: | You can’t say that the inequities in lending are the responsibility initially of anyone but the federal government. And so when you are explicitly responsible for racial inequities, then you need to explicitly take responsibility and utilize your regulatory authority under the Community Reinvestment Act to address it. |
Emily Harris: | Paulina Gonzalez-Brito, head of the California Reinvestment Coalition, hopes there’s momentum now. |
Paulina Gonzale…: | I think to be honest, what is happening is a real reckoning around race in this country. The murder of George Floyd made us all really look at the ways in which white supremacy and systems are complicit and the financial system has to be one of the systems that we look at. It has to be policy changes and systems changes if we’re actually going to make a difference in the way that they’ve been functioning for generations. |
Sarah Gonzalez: | Reveal’s Emily Harris brought us that story. It wasn’t just traditional banks that got involved in PPP loans, online lenders jumped in too. But community lenders were largely shut out at the beginning for a variety of reasons. Then, last May, two months after the program started, the Trump administration set aside $10 billion of PPP money for community development, financial institutions. But money is not the only ingredient. Reveal’s Laura Morel followed along with a loan officer at one of these financial institutions in Arizona to see what it takes to reach businesses that large banks leave behind. |
Laura Morel: | Just record. There we go. We’re recording. So just to start off can you introduce yourself? |
Mark McKenna: | Yeah, of course. So my name is Mark McKenna, and I’m a business development officer for Prestamos CDFI. |
Speaker 35: | Prestamos CDFI is your partner in economic development, small business growth and quality job creation. Our loan products and consulting services are designed for- |
Laura Morel: | Prestamos means we lend in Spanish and that’s what Mark does. He helps small businesses get access to capital. |
Mark McKenna: | I work in the southern Arizona community and I support that part of Arizona. |
Laura Morel: | When I zoom with Mark, he’s usually wearing a baseball cap. |
Mark McKenna: | So this is the logo university of Arizona. This is the Wildcats. |
Laura Morel: | Okay? |
Mark McKenna: | And if you live in Tucson, you’re a Wildcat fan. |
Laura Morel: | Mark’s a Tucson guy born and raised there. He’s an Irish and Mexican descent. And although his parents spoke Spanish, he’s not completely fluent. |
Mark McKenna: | I understood Spanish but I just never had conversational Spanish growing up. But along the years and speaking with people, I’ve kind of honed my skills, especially like in banking terminology and lending terminology. So you learn those words, and I can roll my arms- |
Laura Morel: | And that helps Mark and his team reach out to clients in Latinx communities in the southwest. Prestamos outreach seemed to make a difference last year. In Tucson and Phoenix, about 10% of loans overall went to businesses and majority Latinx communities. About 25% of Prestamos loans did. |
Mark McKenna: | [Shairoy] is ebony available? |
Laura Morel: | For the past year Marks been set up with three computer screens in his bedroom, working the phone’s day and night. |
Mark McKenna: | Yeah, let her know Mark McKenna called from Prestamos. |
Laura Morel: | He’s racing to get applications and before the deadline. |
Mark McKenna: | Yeah, because we’re all working towards that cutoff point. But there’s going to be a day where on this day, if they asked that if it’s not getting looked at. |
Laura Morel: | We’ve heard that when the government rushed out the first round of PPP last year, the big banks were encouraged to make loans to their existing customers. That meant a lot of smaller businesses that didn’t have relationships with the bank missed out. And it disproportionately harmed business owners and majority black and Latinx communities. |
Mark McKenna: | You hear well, I applied there but we didn’t have any luck. |
Laura Morel: | Just like Daniel the barber in LA, many small business owners in Tucson and across the country didn’t even bother applying in the first rounds, especially the smallest of businesses, the sole proprietors. And there are nearly 25 million of them in the United States. They’re landscapers, daycare owners, accountants, fitness instructors. Mark says he’s connected with many sole proprietors, who figured that they didn’t qualify because they didn’t have employees. But it turns out, they did qualify. He tells me about a business owner he reached out to in the third round of PPP that started in January and he was able to help her get a small loan about $975. |
Mark McKenna: | But she’s happy. She’s like, Man, I’m so glad. You helped me out with this and she’s grateful for it. |
Laura Morel: | Going over her tax return, he noticed something. |
Mark McKenna: | I’m seeing … You know that her husband, he’s a taxi driver. He also filed a Schedule C. |
Laura Morel: | That’s a tax form that sole proprietors and independent contractors use. |
Mark McKenna: | Hey, I said, you got to get your husband to apply too. Let’s get him. He has that money available to him. And she’s like, “Are you kidding me? Oh, my God, you don’t know what this is going to do for us right now.” Those are the stories that keep me working to midnight. |
Laura Morel: | Mark has called a trucking company trying to persuade management to get their independent drivers to contact him. He zooms with business groups and he tells everyone he knows to tell somebody they know to call him if they run their own business and could use the hand surviving the pandemic. |
Mark McKenna: | Hear, my barber. I’m like, Hey, dude, you didn’t apply last year? I’m telling them. I said, You know what, I’m going to tell you right now. You better give me your stuff so you can benefit. So he did. He got like little over 3000. |
Laura Morel: | These amounts seem tiny when you consider the average PPP loan is about $100,000. But for some small businesses, it can mean the difference in paying the rent or the electric bill. Finding people who didn’t apply is one challenge. Another, Mark says some of his clients don’t have their financial documents in order or just can’t get them to him. |
Mark McKenna: | I would tell people, yes, scan your documents for me and send them to me by email. Here’s my … You know they don’t have a scanner at home or much less a computer. |
Laura Morel: | So Mark gets creative. He tells them to take a photo of their ID and bank statements and send them to him. Just like the banks CDFI make a commission on PPP. Prestamos made about 900 loans totaling some $26 million last year. It’s not a huge number. |
Mark McKenna: | We’re not going to do the volume, per se but we’re definitely going to add value to the process. And I don’t know how many times people will say, Oh my gosh, I can’t believe I’m talking to somebody. So I’m like, Yeah, you’re talking to somebody. |
Laura Morel: | Nationwide CDFI has processed only 13% of the PPP loans last year. They don’t have the resources of big banks. When I asked Mark what banks could be doing to reach more communities of color, he says it’s pretty simple. They need to build relationships in those communities. |
Mark McKenna: | But it takes a lot of time and probably a little bit more money. |
Laura Morel: | I started calling Mark in February, that was near the beginning of the third rounds of PPP, which started in the last days of the Trump administration. About a week after our first conversation- |
President Biden: | I just had an opportunity to catch up with two small business owners I met. |
Laura Morel: | President Biden announced changes to the PPP program to make it easier for small business owners. |
President Biden: | On Wednesday, the Small Business Administration is going to establish a 14 day exclusive PPP loan application period for businesses and nonprofits with fewer than 20 employees. |
Laura Morel: | And there was a key revision for the smallest business owners, the sole proprietors. They could now qualify based on their gross income before it was based on that income what they took home after taxes and expenses. |
Mark McKenna: | Ron, how are you? This is Mark McKenna with Prestamos. |
Laura Morel: | What that boils down to is more of Mark’s clients are qualifying and some are getting more money. |
Mark McKenna: | So based off of your schedule C- |
Laura Morel: | They’ll also have a little more time to apply. The Small Business Administration is now accepting PPP applications until the end of May. |
Sarah Gonzalez: | Thanks to Reveal’s Laura Morel. Mark McKenna is busy helping tiny businesses get emergency help to make it through the pandemic. Plenty of big businesses got PPP help too. But what happens when companies get government money to protect workers and they don’t do it? You’re listening to Reveal. |
Sarah Gonzalez: | From the center for investigative reporting and PRX this is Reveal. I’m Sarah Gonzalez. The restaurant industry was one of the hardest hit by the pandemic. When stay at home orders spread throughout the country last year, about 180,000 of them abruptly shut their doors. PPP loans were supposed to help restaurant workers keep their jobs but also keep them safe. Owners who got PPP money had to agree to follow workplace safety requirements set by OSHA, the federal agency in charge of worker safety and health. |
Sarah Gonzalez: | More than a billion dollars went to fast food franchises like Wendy’s, Pizza Hut and McDonald’s. So did companies that got PPP money follow through on their promises to keep people safe? Freelance journalist Gabriel Thompson and Reveal’s Lance Williams investigated McDonald’s. Where more than 2000 franchises got PPP money. And Gabriel joins me now. Hey, Gabriel. |
Gabriel. T: | Hi, thanks for having me. |
Sarah Gonzalez: | Okay. You looked at what happened at one particular McDonald’s that is owned by someone who owns several McDonald’s. |
Gabriel. T: | Yeah. This is one of these larger franchisees who operates 15 McDonald’s mostly in the Chicago area. The owner there received more than half a million dollars in PPP money. And one of the stores that operates is a big brick building on Chicago’s southwest side. I got to know two women who work there. Adriana Sanchez and Kenia Pineda. And Kenia went on maternity leave in the early days of the pandemic. But when she came back last summer, she was amazed that with the pandemic and full swing, the McDonald’s look pretty much the way it did before. |
Kenia: | [foreign language]. Oh, my god. [foreign language]. |
Gabriel. T: | So she’s saying here that the store was simply so busy with orders and that they needed a lot of workers and those workers simply couldn’t be socially distance. Both Kenia and Adriana told me that it wasn’t uncommon that four or five people all on top of each other, especially near the drive thru window. And they said they would run out of basic supplies like hand sanitizer and gloves and soap. So at times they were washing cooking dishes with just water. And that Masks were a problem. They said the company had a supply of disposable masks but when they asked for them they were told that those masks were for customers who entered not for the workers themselves. |
Sarah Gonzalez: | Was there something they could do about this? Did they talk to their bosses? |
Gabriel. T: | Yeah. Adriana did and she describes response always being sort of like nothing. And so that’s why in July she actually filed a complaint with OSHA. In that complaint, she alleges that McDonald’s is not providing workers with proper masks at the job. |
Sarah Gonzalez: | Did OSHA do anything about these complaints? |
Gabriel. T: | Yeah. OSHA sent a letter to Adriana’s employer and corresponded with them. But then close the case without doing an actual inspection of the McDonald’s or even speaking directly with the Adriana. |
Sarah Gonzalez: | What is the inspection part supposed to result in it? Does it result in fees, fines? Like why does the inspection part matter? |
Gabriel. T: | A company can have all sorts of great proposals or procedures on paper. But if you’re not out there inspecting, I think you’re really allowing employers to police themselves. And OSHA obviously can inspect every complaint. But we found that during COVID, no they really took the path of inspecting almost no one. And that was very common. That’s according to David Michaels. He’s the former head of OSHA under Obama. He also told me it didn’t have to be this way. He said during that 2008, 2009 recession, the government gave billions of dollars to employers to keep folks working and they also gave OSHA money for inspections. And that’s really what didn’t happen here. |
Sarah Gonzalez: | Are there any consequences for restaurants that receive PPP money, but also faced just like a ton of complaints about COVID and safety? |
Gabriel. T: | In a word, no. I mean, you could be a business that gets PPP funds, that racks up a long list of complaints around COVID safety or that has multiple outbreaks of COVID-19. But there’s nothing that states in those loans that if you do that your loan won’t be forgivable. From March through December of last year, fast food workers filed more than 1600 Coronavirus related complaints to OSHA. And more than 80 of those complaints were at fast food restaurants with owners who received PPP money. |
Gabriel. T: | And one of the perennial complaints, again is the lack of masks for workers on the job. In fact, at McDonald’s in Oakland workers complained that a manager suggested they actually wear dog diapers for masks on their faces. Apparently a customer had left a box of dog diapers at the store and that was a suggestion for how they can protect themselves from COVID-19 was to actually place these dog diapers on their faces. |
Sarah Gonzalez: | Well, I mean, I get improvising but dog diapers doesn’t feel like the right move there. All right, so several months have passed since Kenia and Adriana first OSHA complaints in the summer, have things changed at their restaurant since then? |
Gabriel. T: | According to them not all that much. This past October, they said soap was still running out, they’re still running out of supplies like hand sanitizer and gloves and masks. It was still super crowded at the drive thru window. And then one day Kenia arrived at work and she noticed that there was a long line of cars longer than normal in drive through lane. And everything seemed backed up and a lot of her co workers simply weren’t there. |
Gabriel. T: | And folks were wondering what’s going on and then she hears the manager say … |
Kenia: | [foreign language]. |
Gabriel. T: | That a bunch of people had called in sick. So Kenia goes home after that shift and she gets tested for COVID and she tests positive and eventually her whole family will get sick. Her husband, her three kids, including her baby and that was enough for Adriana. When she learned that a friend Kenia was positive, they both decided that they finally needed to take more action. |
Kenia: | [foreign language]. |
Gabriel. T: | So here she’s saying, no, this is enough. They both decide right then to go on strike and it’s just the two of them. They’re supported by the fight for 15 that’s this campaign to organize and protect fast food workers that’s run by the Service Employees International Union. They’re the ones who put me in touch with Kenia and Adriana. And along with going on strike, they filed two new OSHA complaints. |
Gabriel. T: | Again, these complaints are about lack of masks, lack of social distancing. But they also point out that they’ve learned six workers at the restaurant have tested positive for COVID-19. And then in addition two floating workers, the ones who would move from store to store and worked at their own store had died from COVID-19. |
Gabriel. T: | After a couple of weeks, the women both returned to work. But then a week after returning to work, Adriana then contracts COVID and she has to stay home more than two weeks to recuperate. |
Sarah Gonzalez: | Now, just as a reminder, the point of PPP loans is to continue to pay workers even if they have to stay home. So did Adriana or Kenia or any of the other McDonald’s workers who got sick, did they get paid to stay home? |
Gabriel. T: | Adriana told me that for nearly three weeks she was out she only received 14 hours of paid sick time. So that’s roughly two days worth. And Kenia who missed about the same amount of time said she only received eight hours. Later, Kenia’s manager gave her an additional week’s pay and told her that was because she was a good worker. |
Sarah Gonzalez: | What did the owner say about all of this? |
Gabriel. T: | I reached her by phone, she declined to speak with me. However, later through a spokesperson with McDonald’s USA she did send a statement that masks were available to workers at being in late April 2020. And that there had never been a break in supplies for gloves, soap or masks at the stores. She also said that she has a policy of offering paid sick leave to those impacted by COVID-19. |
Gabriel. T: | Again, that contradicted what Kenia and Adriana described to me. I also hope to have an interview with McDonald’s corporate office representatives. They didn’t agree to an interview, but they did send me a statement in which they noted that they had quote, enhanced over 50 operational and safety processes and restaurants, including requiring masks, gloves and daily wellness checks. But again, the descriptions from Adriana and Kenia really paint a quite a different picture. |
Sarah Gonzalez: | All right, Gabriel, thank you so much for talking to us. |
Gabriel. T: | Thank you for having me. |
Sarah Gonzalez: | That was freelance journalist Gabriel Thompson. There have been three rounds of PPP loans, none of them included worker protections. Under President Biden OSHA has started an initiative to increase inspections of workplaces for COVID-19 hazards. Kenia and Adriana store was inspected in January, but OSHA found no violations. By the time of the inspection the restaurant had put in place, plexiglass dividers and other worker protections. |
Sarah Gonzalez: | This story featured additional reporting from Lance Williams. It was produced by Amy Mostafa. If you want to hear more stories about money and the economy, you should check out my podcast. It’s called Planet Money from NPR. |
Sarah Gonzalez: | Reveal’s Mohamed Al Elew did the data analysis for today’s show. Our lead producer this week is Emily Harris. She had help from David Rodriguez, Stan Alcorn and Avishai Artsi. Jennifer Goren and Taki Telonidis edited today’s show. Soo Oh is our data editor, Esther Kaplan edited the digital version of the story, which you can find at revealnews.org. Special thanks to Aaron Glantz and Sarah Cohen. |
Sarah Gonzalez: | Victoria Baranetsky is our general counsel. Our production manager is Amy Mostafa. Score and sound designed by Jim Briggs and Fernando Arruda. They had help this week from Brett Simpson and Amita Ganatra. Our digital producer is Sarah Mirk. Our CEO is Christa Scharfenberg. Sumi Aggarwal is our interim editor in chief and our executive producer is Kevin Sullivan. |
Sarah Gonzalez: | Our theme music is like Colorado lightning. Support for Reveal is provided by the Reva and David Logan Foundation, The John D. and Catherine T. MacArthur Foundation, The Jonathan Logan Family Foundation, The Ford Foundation, The Heising-Simons Foundation, The Democracy Fund, and The Inasmuch Foundation. Reveal is a co-production of the Center for investigative reporting and PRX. I’m Sarah Gonzalez. Thanks for listening. |
Speaker 40: | From PRX. |