Banks and governments must require the tracking and reporting of race, ethnicity, gender, and neighborhoods of borrowers

SAN FRANCISCO, April 14, 2020 – Small business owners, non-profit lenders, and the California Reinvestment Coalition comprised of over 300 community organizations share concerns that capital relief from the stimulus bill (also called the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act) is not supporting some of the hardest hit businesses in low income communities owned by women and people of color. Historically borrowers of color have been systematically discriminated against when accessing loans and the experience leaves many suspect of big banks. Now as some big banks require a pre-existing lending relationship before honoring an application for CARES relief, the impact of redlining deepens.

In addition, as states, counties, and cities put together small business loan and grant programs to support small businesses impacted by shelter in place orders, it is imperative that they too collect demographic data to ensure people of color and immigrants are not left out of relief efforts.

The stimulus package includes Paycheck Protection Program loans that can help small businesses survive this unprecedented crisis. The program includes nearly $350 billion in potentially forgivable loans to keep workers on the payroll. This is a lifeline that must reach business owners in communities that are hurting the most. As new data emerges, it has become clear that African Americans have contracted and died of Coronavirus at an alarming rate. Just as with the foreclosure crisis, this crisis has shown the effects of decades of disinvestment in communities of color.

Concerned about unfair requirements for stimulus loans that are reinforcing redlining practices and will deepen the income inequality in California and elsewhere, we are calling on the federal and state government to respond:

  • Ensuring Equal Access. Require all lenders and governments to track and report the race, ethnicity, gender and neighborhoods (census tract) of the borrowers who are applying for and receiving loans and grants. The SBA and all programs must include these questions on loan application forms. We have existing models such as the federal Home Mortgage Disclosure Act which tracks mortgage lending by borrower and neighborhood data.
  • Empowering Community Lenders. Authorize all Community Development Financial Institutions (CDFIs) to make PPP loans, as these non-profit lenders are in the community and making loans to businesses of color that have long been ignored by banks.
  • Prioritizing Borrowers of Color. Set aside stimulus and other dollars for lending and grants to businesses owned by people of color and ITIN holders, and/or operating in neighborhoods of color.
  • Providing Payment Relief. Require small business lenders to offer small business borrowers forbearance on existing loans and suspend predatory Merchant Cash Advances.

“The COVID-19 crisis is hurting communities of color the most. People of color are more likely to get infected, they have higher mortality rates from the virus, and are more likely to have a pre-existing condition that puts them at higher risk. People are hurting, our local economy has been devastated by this virus, and we cannot afford to let our small businesses of color shut their doors. We must act to ensure women and minority owned businesses get their fair share of relief,” said Paulina Gonzalez-Brito, Executive Director of the California Reinvestment Coalition.

“There has been a pervasive history of lack of lending and investment into small and microenterprise businesses in low income communities and communities of color. The impacts of COVID-19 pandemic have been most harsh on those very same small businesses; they are the ones hurting the most. We have witnessed on all fronts the stark disparities that have raised their ugly heads, and once again damaged the communities we serve. As a not for profit lender, we work desperately to insure our communities get their fair share. But, those disparities will remain hidden if the collection of race and neighborhood data continues to be ignored.” – -Deborah Muramoto, President//CEO, California Capital Financial Development Corporation.

“Big banks have a terrible track record of lending to small business owners of color in communities that are hurting the most, including non urban areas. As a not for profit lender, we work everyday with communities of color and we are in the communities that desperately need investment. The PPP and other federal, state and local initiatives should grant to all Community Development Financial Institutions the authority to make loans to the small businesses that need them most but that are often passed over by banks.” — Tate Hill, Director, Administration, Access Plus Capital.

For further information supporting these recommendations, see:

CRC report on discrimination and lending to small businesses.

Letter from Chair Maxine Waters and Representative Velasquez to Big Bank CEOs.

Letter from Oakland Ethnic Chambers of Commerce calling for lending transparency, aspirational lending goals and strategic partnerships.

Press Contact: Fermin Vasquez