COVID relief loans didn’t add up for LGBTQ-owned businesses: study

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According to the researchers, LGBTQ-owned small businesses received COVID-19 relief funds at a lower rate than their non-LGBTQ counterparts, even though they were more likely to apply for loans during the pandemic.

The report, released by the Center for LGBTQ Economic Advancement and Research and Movement Advancement Project, analyzed data from the Federal Reserve’s annual Small Business Credit Survey, which included questions on LGBTQ identities for the first time. in 2021.

Experts tell USA TODAY that “worse economic conditions” on average among LGBTQ-owned small businesses have hurt them when seeking COVID relief — even though Congress has said it’s “targeting funding to smallest and minority-owned businesses”.

Paycheck Protection Program loan applications included a section where businesses could declare they were female, minority or veteran. But the Small Business Administration, which handled the PPP loans, did not include a section “for business owners to distinguish their businesses as LGBTQ-owned,” the SBA told USA TODAY in a statement.

“The lack of visibility of queer people really means that our concerns are ignored,” said Spencer Watson, Executive Director of CLEAR. After 60 years of queer political activism, they said, “It’s time for our government institutions to wake up and realize they need to support queer communities.

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Even if loan providers did not discriminate against businesses because of their LGBTQ ties, the percentage of businesses rejected for loans indicates underlying systemic economic discrimination, said MAP policy researcher Logan Casey.

The report, released this summer, found that a greater proportion of LGBTQ-owned small businesses (57%) applied for PPP loans during the pandemic, compared to non-LGBTQ-owned businesses (47%).

But only 54% of LGBTQ-owned businesses got the requested funds, compared to 68% of non-LGBTQ-owned small businesses.

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In addition to being in poorer financial health, LGBTQ-owned small businesses were more likely to report that they felt they had been turned down for loans because “lenders don’t approve financing for businesses like mine. “, according to the report.

Historically, lenders have been prohibited from lending to LGBTQ-related businesses, and that precedent still affects loan application decisions, Watson said. They pointed to a rule still on the books of the SBA that companies that derive revenue from products or displays of a “lewd sexual nature” are not eligible for loans.

“You can imagine all these different scenarios where if a person doesn’t approve of anything, these broadly categorized and ill-defined restrictions give them a place to cover up the discrimination behind that decision,” Watson said.

If a loan provider is unfamiliar with LGBTQ culture or the LGBTQ community, they may also be less likely to grasp a business concept and more likely to reject a loan application, Watson said.

The Equality Act, passed by the House of Representatives in 2021, would enact discrimination protections for LGBTQ people in credit and banking. The future of the bill in the equally divided Senate is uncertain, even a year after it passed the House.

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When Lisa Smith, who owns Compass Tea Room in Luray, Va., was rejected in the fall of 2020 for a $2,500 PPP loan that would have helped pay utility bills, her best remaining option was to sell her house and move into the back cellar of his business. with his dog, Loki.

She was rejected by the SBA because she is its only employee and has no paycheck documentation, she said.

“Basically, my ledger is my ATM,” Smith said.

Money from the Paycheck Protection Program could have been used for “mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by the looting or vandalism in 2020, and certain vendor costs and expenses for operations”. according to the SBA website.

“Sole proprietors, independent contractors and self-employed people” were eligible for the loans, as well as large businesses, according to the SBA. But experts told USA TODAY that people who didn’t have much experience financing their businesses before the pandemic were at a disadvantage.

So when Smith, who identifies as gay, dipped into her personal funds to keep her business open, she became part of a larger trend.

“Economic insecurity at higher levels in our community to begin with, which puts businesses on a more difficult footing to begin with. And then continuing to face this discrimination in funding becomes a self-fulfilling prophecy,” Casey said.

LGBTQ-owned small businesses that participated in the Federal Reserve Banks survey said they believed they were rejected because they had profitability issues, bad credit, or a lack of paycheck documentation — like Smith, according to the report.

In general, banks were more willing to lend to more established and profitable businesses, which perpetuates financial insecurity for businesses in marginalized communities, Watson said.

Banks “trusted their big partners” during the pandemic, leading to many loans being made to “big companies that didn’t really need them but were probably good bets,” said Watson.

That’s one of the reasons why “we find that these smaller LGBTQ-owned businesses may not have gotten as much,” Watson said.

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Businesses that were able to secure PPP loans are still eligible for loan forgiveness, according to the SBA. But LGBTQ-owned small businesses have also fared worse than their non-LGBTQ counterparts when it comes to forgiveness.

The CLEAR and MAP report found that 78% of LGBTQ-owned businesses received full loan forgiveness, compared to 88% of non-LGBTQ-owned businesses.

Because they haven’t secured the financial support “due to them,” Watson said, “LGBTQ-owned businesses are going to recover much more slowly from the pandemic and will continue to suffer from the scars of this time.”

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