University of Massachusetts Amherst: Equity Suffered in Rush to Get Loan Assistance to Small Massachusetts Businesses During Pandemic, Report from UMass Donahue Institute Finds - India Education Diary

Lending to tiny businesses successful Massachusetts peaked successful the archetypal twelvemonth of the pandemic but not to low- and moderate-income and bulk persons of colour census tracts, according to a study released by the Massachusetts Community & Banking Council and the University of Massachusetts Donahue Institute.

Overall, Community Reinvestment Act information shows lending institutions made 194,025 tiny concern loans successful Massachusetts successful 2020. Approximately 35.4 percent of loans went to businesses with yearly revenues of $1 cardinal oregon less. The fig of CRA loans has accrued gradually since 2009, reaching a caller highest successful 2020. When the pandemic hit, astir 28,000 much loans were issued compared to 2019 mostly owed to the Paycheck Protection Program, a Small Business Administration-backed indebtedness that helped businesses support their workforce employed during the COVID-19 crisis.

Compared to 2019, the 2020 CRA information shows immoderate shifts successful the fig of geographies that received loans. The wide indebtedness number grew; however, determination was not a proportionate summation successful loans to low- and moderate-income and bulk persons of colour census tracts. Tracts that were mediate to upper-income oregon bulk achromatic received some much loans this twelvemonth than past overall, and proportionately a higher stock of loans issued.

“There is increasing grounds that nary substance what the eventual origin of disproportionate entree to capital, successful the unreserved to get retired backing to businesses during the pandemic, equity suffered,” said Carrie Bernstein, probe manager and authorities information halfway manager astatine the UMass Donahue Institute.

One of the drivers of this disparity is differing entree to banking services. A Federal Reserve study from August 2020 notes that astir Black concern owners bash not person an existing banking relationship, which analyzable applying for these loans and securing them erstwhile the exertion had been submitted. Even with entree to a bank, the quality of that slope to unafraid Paycheck Protection Program loans for their clients varied wide with immoderate banks not submitting applications to the national authorities until conscionable earlier funds had been depleted successful the archetypal round. This weakened PPP loans arsenic a root of assistance to communities of color. Business closures were transpiring astatine this clip astatine precise precocious rates, and much truthful for owners of color. The Federal Reserve noted that, “Nationally typical information connected tiny businesses bespeak that the fig of progressive concern owners fell by 22 percent from February to April 2020” and that Black-owned businesses closed astatine astir astir doubly the complaint of tiny firms wide (41 percent nationally). The study besides notes that Hispanic and Asian-owned firms closed astatine above-average rates (32 percent and 26 percent respectively) portion achromatic firms closed astatine below-average rates (17 percent). These information points suggest that contempt ample amounts of wealth being made disposable to businesses during the archetypal twelvemonth of COVID, it often did not spell to the communities and businesses that needed the assistance the most. This disparity, oregon closures that transpired adjacent earlier the indebtedness programme started, oregon both, whitethorn person driven the smaller fig of loans to bulk POC and low- oregon moderate-income tracts successful the 2020 CRA dataset.

Utilizing CRA information connected the fig of loans issued, American Express is the astir progressive lender successful Massachusetts implicit the past 10 years issuing smaller loans to existing Amex recognition paper holders. However, Bank of America loaned much than triple the magnitude of dollars than American Express successful Massachusetts. Combined, Bank of America and Citizens Bank made up somewhat implicit 20 percent of each the indebtedness dollars issued successful Massachusetts successful 2020. These 2 banks fertile 2nd and 3rd respectively successful the fig of indebtedness originations, aft American Express. The remainder of the apical 10 lenders successful presumption of indebtedness number were arsenic follows: Eastern, JP Morgan Chase, Lake Forest Bank & Trust, Rockland Trust, Capital One Bank, and TD Bank.

In 2020, Eastern Bank and Rockland Trust were the astir progressive CRA tiny concern lenders of those headquartered present successful Massachusetts. Combined, these 2 lenders made implicit 15,846 loans successful 2020, astir 3 times what they issued successful 2019 owed to the Paycheck Protection Program. Local institutions picked up the measurement of lending successful 2020. According to the report, determination were thirteen lenders headquartered successful Massachusetts that issued much than 1,000 tiny concern loans successful 2020 portion that fig was lone 2 successful 2019. Cape Cod Five, Enterprise Bank, Berkshire Bank, Avidia Bank, Middlesex Savings, and Westfield Bank were Massachusetts-based institutions that were successful the apical 25 wide tiny concern lenders successful the state.