A class-action lawsuit alleges the Paycheck Protection Program is discriminating against women and minorities, who are more likely to own businesses without employees.
The Paycheck Protection Program is the federal government’s main tool for keeping small businesses afloat and their workers employed during the coronavirus crisis, but critics allege that it’s failing to aid the most common type of small business — one without employees — and that’s disproportionately harming women and minority entrepreneurs.
Even after PPP funding was replenished last week, these businesses remain at a disadvantage because sole proprietors and independent contractors are not allowed to include health-care and 401 contributions when calculating loan amounts, Kraeuter added. Further compounding the troubles faced by more than 24 million businesses in the U.S. that have no employees is that it would be less profitable for banks to prioritize PPP loans to these firms, because they generate smaller fees, and because they often don’t have existing lending relationships with banks.And read:These public companies are returning emergency loans meant for small businesses
While making sense from a business perspective, this sort of behavior hurts businesses and communities who need the money most, said Ashley Harrington, an attorney with the Center for Responsible Lending. “Communities of color haven’t even recovered from the Great Recession,” she said. “They were still rebuilding, and these are communities hit hardest by the pandemic.”
In an effort to “ensure special access” to PPP funds for businesses that have been so far locked out of the program, the SBA announced a special eight-hour window on Wednesday when the government would only accept loans from lenders with asset sizes less than $1 billion.
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