Flawed Federal Relief Program Left Out Inland Businesses in Minority Neighborhoods
For the past 13 years, Torta Sinaloa has been in the same corner of a small retail center off the 91 in Corona. In the windows, are posters advertising their steak sandwich and juices. Inside it’s quiet, with only a family of three waiting for their order.
Owner Sergio Desantido was working the kitchen. Like many small businesses in the region, he has been hit hard by the lockdowns. “At the beginning of this whole COVID-19 we dropped the sales by 60 percent,” said Desantido.
Desantido laid off all but three of his workers, sending 13 others to the unemployment line in a region that was already seeing record high job losses. Last May, unemployment rate here was 15 percent, two points higher than the nation.
The Paycheck Protection Program was supposed to help small business owners like Desantido avoid layoffs. It was a big part of the federal government’s COVID-19 relief package, extending more than half a trillion dollars to small businesses through banks to keep workers paid. Here in the Inland Empire, not everyone was equally served by the PPP.
The non-profit newsroom Reveal analyzed more than five million PPP loans from April to August last year and found in many cities across the country, businesses in Latino neighborhoods, like Torta Sinaloa, were far less likely to get help than those in white neighborhoods.
Disparities in the Inland Empire were stark at times. According to Reveal, only 18 percent of businesses in Desantido’s Latino majority neighborhood got a PPP loan. Head 17 miles northeast to Riverside’s majority white Mission Grove neighborhood, and 98 percent of businesses received one. It was a pattern that repeated across the region.
Desantido never saw any of the PPP funds. He never even applied. Desantido said the process sounded complicated and there was no one to help.
“The main reason that I didn't get any loans is because I didn't understand,” he said.
Carmen Lainez, Chair of the Greater Riverside Chamber of Commerce, said the PPP rollout was chaotic. “For the Latino community [and] brown communities, it was a little upsetting to our business owners,” said Lainez. She also saw a type of favoritism that shut a lot of people out.
“Obviously the banks gave it to the preferred clients. It ran out really fast,” said Lainez. “I don't think a lot of the smaller business owners or business owners of color were able to apply.”
There were a lot of factors that made getting the money hard. Lainez said business owners, especially in the Latino community, often use paper records over digital programs. Plus, there are language barriers, and there’s a lack of existing banking relationships.
“It's sad to say it. But there are a lot of businesses that are not going to survive this,” said Lainez.
Patterns of Inequality
With lockdowns in place, Desantido’s business was short on cash and his personal savings were running out. First he called his restaurant’s landlord about delaying rent.
“I call them and they say we can do nothing for you. We can give you two weeks. You don't have to pay me on the 1st, you can pay me on the 15th. But it's all we can do for you,” said Desantido.
To meet his business rent he had to stop paying his mortgage for three months. As the economy started to re-open, business picked up and Desantido was able to save his house.
Advocates told KVCR it shouldn’t have come to that. Kevin Stein of the non-profit California Reinvestment Coalition said there are problems with the program that could have been avoided. “There are ways to do it better. One would be not to have the relief driven through primarily financial institutions that have excluded people historically,” said Stein.
The biggest PPP lender in the Inland Empire was Bank of America, which helped more than 8,265 businesses stay afloat. Bill Halldin, a Bank of America spokesperson declined to be interviewed. He told KVCR by email that they gave more than 82 percent of their loans to businesses in minority neighborhoods.
Reveal found Bank of America’s loans went disproportionately to businesses in white neighborhoods. Kevin Stein said, those disparities can have a huge impact on the community.
“Many small businesses, especially the ones we're talking about, are really serving communities,” said Stein. “When they fail, communities lose out too.”
This story was done in partnership with The Center for Investigative Reporting’s Reveal podcast and Big Local News. To read the original investigation into Los Angeles businesses click here.