New stimulus package offers help for minority-owned businesses
The latest federal stimulus bill includes benefits targeted at minority business owners. This bill provides good news for minority businesses, as many have been disproportionately affected by the pandemic.
For example, between February and April 2020, 41 percent of Black-owned small businesses shut down, along with 32 percent of Latino-owned small businesses, compared with 17 percent of White-owned small businesses.1 And in a new U.S. Chamber of Commerce survey of business owners, minority owners reported: “feeling a bigger impact from the pandemic, report assistance being more vital, and have heightened concern about the pandemic’s impact.”2
While the CARES Act passed in March 2020 included Payroll Protection Program (PPP) funds intended for small businesses, only a few minority businesses received them. In May 2020, less than one half of 1 percent of Black business owners reported receiving government benefits for businesses affected by the coronavirus epidemic compared to about 9 percent of non-Black business owners, according to one study.3
The new law, passed in late December 2020, intends to provide better aid for minority business owners. Here’s how minority business owners can access the benefits.
New PPP loans
The latest stimulus bill includes an additional $284 billion for PPP loans. And the rules have changed to help direct these funds to struggling businesses.
To be approved for a PPP loan, a firm must have fewer than 300 employees and show a 25 percent decrease in revenue from one quarter in 2019 to the same quarter in 2020. Most borrowers can receive up to 2.5 times their average monthly payroll cost one year before the loan. But restaurant owners can get up to 3.5 times their average payroll cost.
Eligible businesses can apply for new or second PPP loans, and if they spend 60 percent of the loan on payroll and utility expenses, the loans can be forgiven. Apply with any Small Business Administration (SBA)-approved lender.
Focus on minority-owned businesses
The latest version of PPP includes specific amounts targeted to minority-owned businesses. The legislation set aside $15 billion for new PPP loans, and $25 billion for second PPP loans for small businesses with ten or fewer employees and are located in low-to-moderate income areas. These areas include a poverty rate of 20 percent or higher. An SBA-approved lender can help you determine if your business qualifies.
Resources for organizations that help minority businesses
In addition to setting aside funds for minority businesses, the new stimulus bill sets aside $15 billion for small community banks and small credit unions that often provide loans for minority businesses. The package also includes another $15 billion for mission-based community lenders like:
- Minority depository institutions,
- SBA microloan intermediaries,
- Community development financial institutions, and
- Certified development companies.
All of these organizations offer resources for minority-owned businesses and companies located in disadvantaged areas, and these extra funds will allow them to serve their constituents better.
Minority businesses can use the Economic Injury Disaster Loan Program
In addition to the PPP, which came to life in response to the coronavirus pandemic, the SBA also offers an Economic Injury Disaster Loan (EIDL) Program. This program has typically offered loans to businesses in areas hit by natural disasters, but in the past year, it has offered loans to businesses affected by the pandemic. The new stimulus package provides an additional $20 billion for this program, which typically offers long-term (30-year) loans at a low fixed-rate (3.75 percent).
In response to COVID-19, the EIDL program originally offered loan advances of up to $10,000 to qualifying businesses. However, the program ran out of money, leaving many small businesses without this extra help. The new stimulus package will allow the program to resume making these loan advances or grants up to $10,000.
How can minority businesses qualify for emergency grants?
The EIDL program also offers emergency grants, which do not have to be repaid. A business owner who applies for a loan through the EIDL program can request a grant of up to $10,000. The business must meet the following three criteria:
- Be located in a low-income area,
- Have 300 or fewer employees, and
- Have suffered a 30 percent revenue loss due to the pandemic.
To show the 30 percent loss, business owners must compare a two-month period in 2020 with the same period in 2019.
Qualifying business owners can get these grants even if their loan application is not approved, and even if they already received a PPP loan. Visit the SBA website to apply for an EIDL loan or grant.
Voya Just Right AdvantageTM program offers additional support for minority-owned small businesses
Just as the U.S. Congress is working to provide more assistance to minority business owners, Voya is also working to ease the pandemic's pain. Voya’s Just Right AdvantageTM program is a first-of-its-kind initiative designed to support greater retirement planning opportunities for businesses owned by minority, veteran, women, disability, and LGBTQ-owned businesses — as well as the nonprofit organizations that serve them. Through the program, these undercapitalized, underserved, and “under-saved” communities may be eligible for a fee credit when they establish or retain their retirement plan with Voya. In helping to support the employees within these businesses to become better prepared for retirement, the Voya Just Right Advantage program further expands on Voya’s recent efforts to help Americans address the financial challenges of COVID-19.
Times are tough, but there are several opportunities for minority business owners to take advantage of extra help and assistance. Now is a great time to learn more about the SBA programs, seek out an SBA lender and build relationships to help your business survive and thrive.
Learn more about how Voya can help small minority-owned businesses by visiting the Small Business Resource Center.
This information is provided by Voya for your education only. Neither Voya nor its representatives offer tax or legal advice. Please consult a tax or legal professional regarding your specific circumstances.