Black applicants have less success getting government-backed small business loans intended for businesses that have struggled during the coronavirus pandemic, according to a new study.
The National Community Reinvestment Coalition experimented by sending Black and white applicants with roughly the same business profiles and good credit scores to banks to get small business relief loans for their businesses during the coronavirus pandemic.
On 43% of those visits, white business owners got better treatment than Black business owners, according to the study released earlier this week.
The research revealed that each racial group received "different levels of encouragement to apply for loans, different products offered and different information provided by bank representatives."
"The tests show that old patterns of systemic discrimination in lending didn't magically disappear when banks made PPP loans," said Jesse Van Tol, CEO of NCRC.
The study highlighted an instance in which a Black customer didn't get a loan because he didn't have an account with the bank. A similar white applicant was encouraged to open a new bank account, then offered loan materials by the same representative.
"Banks still have a long way to go to root out discrimination, and clearly, they need better training for their employees and more testing to create internal checks and internal pressure to drive out racist practices," Van Tol added.
The bank loans are funded by the Paycheck Protection Program from the Small Business Administration, which hands out forgivable loans through lending institutions to small businesses that got rocked by the pandemic.
The $350 billion program was included as part of the massive $2.3 trillion CARES Act relief package. In April, it received $321 billion when the initial funding was exhausted in only two weeks.
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