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| - Black-owned businesses have been hardest hit by the coronavirus pandemic and there are "stark" disparities in their ability to access US government aid, the New York Federal Reserve Bank said Tuesday. These businesses, which already suffer from racial differences in access to bank lending, have been almost twice as likely to close their doors than the national rate, according to a new study. But in many of the coronavirus hot spots, the share of black-owned firms receiving forgivable loans under the Paycheck Protection Program (PPP) is far lower than the national average, the study shows. That program distributed over $520 billion to small businesses between April and June, with an average loan size of $107,000, according to the Small Business Administration, but the report shows "stark PPP coverage gaps in these hardest-hit communities." The analysis shows the "disturbing relationship between high geographic incidence of COVID-19 and the economic health of black-owned businesses," said Claire Kramer Mills, assistant vice president at the New York Fed. About 40 percent of earnings from black-owned businesses are concentrated in just 30 US counties, but only 7.0 percent of those firms in the Bronx, 11.3 percent in Queens, New York, and 11.6 percent in Wayne County, Michigan received PPP loans, compared to nearly 18 percent of firms nationwide. The report attributes some of that difference to the lack of access to or relationship with banks prior to the pandemic, and data show even healthy black-owned businesses secure loans at a lower rate than their white-owned peers. Kramer Mills said "the racial disparities in bank relationships prior to COVID-19 detailed here raise structural questions about the presence and functioning of banks in communities of color, questions that have heightened significance when banks are relied on to administer federal, taxpayer-supported relief programs, as is the case with PPP." These businesses already tend to have less of a financial cushion than others, and rely more on online lenders, which initially were not authorized by the government to lend PPP funds, the report said. In order to have the greatest impact, "the next round of COVID-19 relief should be more targeted geographically to focus on the hardest hit areas and communities that lack critical infrastructure (hospitals, banks) to ameliorate the gaps." hs/cs
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