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Report: Nearly half of LGBTQ-owned businesses have been denied COVID relief loans

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By Victoria A. Brownworth

At the height of the COVID-19 pandemic which shut down many small businesses, the federal government provided relief loans throughout this period. Paycheck Protection Program (PPP) loans were available through May 31, 2021 through the US Small Business Administration.

New data from the Center for LGBTQ Economic Advancement and Research (CLEAR) and the Movement Advancement Project (MAP) shows that LGBTQ-owned small businesses received COVID-19 relief funds at a much lower incidence than non-LGBTQ businesses. LGBTQ.

Still, LGBTQ-owned businesses applied at a higher rate, the researchers found.

The CLEAR and MAP report analyzed data from the Federal Reserve Banks’ annual Small Business Credit Survey (SBCS). In 2021, this data included questions about LGBTQ identities for the first time. Using this data from SBCS, CLEAR and MAP “created a unique insight into the financial health and needs of LGBTQ-owned small businesses.”

Financial experts told USA TODAY that “poorer economic conditions on average among LGBTQ-owned small businesses have hurt them when seeking COVID-19 relief,” although, as USA TODAY reported, Congress said it was “targeting funding at smaller and minority-owned businesses.

And USA TODAY reported that “Lenders have historically been prohibited from lending to LGBTQ-related businesses, and that precedent still affects loan application decisions.”

This ban, USA TODAY noted, is “a rule on the books of the SBA that states that companies that derive revenue from products or displays of a ‘lewd sexual nature’ are not eligible for loans.” A formalized “Don’t Say Gay” applicable to business loans.

“The importance of LGBTQ-inclusive data collection cannot be understated,” MAP Senior Policy Researcher Logan Casey said of the report. “…LGBTQ-owned small businesses have unique experiences, including notable disparities in how they are treated by financial institutions and how they continue to be impacted by the COVID-19 pandemic.

“The findings also illustrate the clear need and opportunity to better support these businesses and the local communities they serve and enrich,” Casey added.

A key point in this report is the fact that while PPP loan applications offered applicants the opportunity to highlight whether they were female, minority or veteran, the SBA did not have a corresponding section allowing business owners to declare that their businesses are LGBTQ-owned.

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The data analyzed shows that LGBTQ businesses were just as likely to request loans or financing in general, but less likely to receive them. According to the report, “about 46% of LGBTQ-owned businesses said they had not received any funding they had applied for in the past year.” This compares to only 35% of non-LGBTQ businesses that applied for funding.

The report states that discriminatory practices seemed embedded in lenders’ responses: “Notably, LGBTQ-owned businesses were more likely than non-LGBTQ businesses to explain that their refusal was because lenders did not approve of the funding “businesses like theirs” (33% vs. 24%), among other reasons. »

While loan providers may not have discriminated against businesses because those businesses were LGBTQ, Casey explained that the sheer volume of LGBTQ businesses being rejected for loans “indicates underlying systemic economic discrimination.”

The data shows that while LGBTQ businesses were more likely to request pandemic assistance, they were less likely to receive it. The majority (57%) of LGBTQ-owned businesses requested relief through the PPP, compared to 47% of non-LGBTQ businesses. A much higher rejection rate was seen for LGBTQ businesses: one in six LGBTQ businesses (17%) said they had not received any funding they applied for in 2021, compared to just one in ten non-LGBTQ businesses (10 %).

Theoretically, LGBTQ small businesses should have received more funding, as these businesses “were more likely to be equally owned by women and immigrants, compared to non-LGBTQ businesses. More LGBTQ-owned businesses were also majority female-owned (34% of LGBTQ businesses vs. 20% of non-LGBTQ businesses) and majority immigrant-owned (21% vs. 15%),” according to the data analyzed.

Another surprising data point in the study is that the CLEAR and MAP report “Despite stereotypes about where LGBTQ people tend to live and prosper, the largest share of LGBTQ businesses were in the South ( 31%), and LGBTQ businesses were also about as likely as non-LGBTQ businesses to operate in rural areas.

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The Philadelphia Gay News previously reported that LGBTQ people have been disproportionately impacted by COVID-19, with LGBTQ households twice as likely to be unable to get needed medical care and four times more likely to not having enough to eat than non-LGBTQ households.

LGBTQ households experienced higher rates of job loss, severe financial problems, problems accessing health care, and increased difficulty navigating home for their children’s learning, compared to households non-LGBTQ.

These disparities are accentuated for low-income Black, Latino and LGBTQ people, reflecting broader national trends of those who have been particularly affected by the pandemic. This new data on LGBTQ-owned businesses therefore parallels the earlier data.

The report showed that more LGBTQ businesses were financially impacted by the COVID-19 pandemic, with 61% of LGBTQ businesses reporting financial losses in 2020, compared to 48% of non-LGBTQ businesses.

In 2021, the disparity not only continued, it widened: 85% of LGBTQ businesses said the pandemic was having a negative effect on their business at the time of the survey, compared to 76% of non-LGBTQ businesses .

Spencer Watson, President and Executive Director of CLEAR, said in a statement, “LGBTQ+ small businesses are engines of mutual support for the LGBTQ+ community. Financial inequality for LGBTQ-owned small businesses contributes to food insecurity, housing insecurity, and poorer health outcomes for LGBTQ+ people in the United States.

Watson added, “Improving financial fairness for LGBTQ-owned businesses will support the economic vitality of LGBTQ+ workers, communities, and the broader American economy.”

Victoria A. Brownworth is a reporter for the Philadelphia Gay News, where this story first appeared.