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Black-owned cos. fell 41% since pandemic began: Survey

Yahoo Finance’s Brian Cheung joins Zack Guzman to discuss COVID-19's impact on Black-owned businesses.

Video Transcript

ZACK GUZMAN: As we are watching negotiations play out here in DC between Republicans and Democrats, obviously PPP is going to be much in focus on that front as we try and navigate what aid is going to be coming to small businesses. And for more on that, I want to bring on Yahoo Finance's Brian Cheung. And Brian, you've been tracking how effective the PPP program has been for businesses. And what are we expecting now?

BRIAN CHEUNG: Well, this is an extension of that conversation that we were just having in the last segment. But the concern really is that a lot of these minority-owned businesses are unable to access funding. And a lot of them might go out of business. So we talked about the shocking statistics of the permanent damage that might be done to these Black-owned businesses.

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But more importantly, the PPP money that was largely talked about in that last CARES Act package likely did not trickle down to a lot of these black communities. So a new report from the New York Fed showing that even though the PPP covered a lot of those non-employer firms, those kind of singly-owned firms that really make up about 96% of Black-owned businesses, they did not get a lot of disbursement from the PPP program. In fact, in the top 30 counties with Black business receipts, they have lower levels of PPP coverage.

So when you consider that in the Bronx here in New York, only 7% of firms got PPP money. In Wayne County in Michigan, only 11.6%. PG County in Maryland, only 12.2%. Compare that to the national average, where in most counties, about 15% to 20% of total businesses did receive loans.

Now, one issue is just the awareness of the PPP program. This is aside from whatever nature of the ethnicity or color of the person that actually took out the loan. There's just a general lack of awareness for a lot of these CARES Act programs. And you saw a separate Philadelphia Fed survey from yesterday that saw nationally, only about 47.4% of households were even aware that the Paycheck Protection Program was such a thing, kind of surprising when you consider that, Zack, you and I talked about this on the show all the time.

So it seemed like the awareness is something that the administration was having a lot of difficulty with, something that could be in view as fiscal policymakers try to engineer this phase four deal.

ZACK GUZMAN: Yeah, something clearly going on there, Brian. We're going to have to look into that. I assumed everyone was watching us all the time. But when we think about what else could come through here, we were talking about it a little bit earlier in the show, thresholds for whether or not you qualify for PPP also being negotiated. A lot of franchises out there, small business owners looking to see if some smaller revenue drops might actually bring in some more companies here to access that capital.

That's something that-- remember when we got the second round, a lot of people were saying it wouldn't last more than a few days. It's still there. Money's still on the table. So what do you make of that?

BRIAN CHEUNG: Well, I think the challenge is that a lot of companies and businesses looked at the PPP terms and said, this just isn't worth it for us. Even though it is definitely attractive that it was a loan that could be forgiven, there was a concern that at the time there wasn't really very clearly laid out the terms for forgiveness. So a lot of companies saying, I don't know if it's worth being saddled with this debt.

But I remember those discussions when that second round of PPP money came out, people were saying, well, we need another trillion dollars of PPP loans. We didn't need anywhere close to that. So I think the design of the next future PPP program, if there is one in phase four, should be in view with the consideration of how do you forgive these loans, which a lot of businesses are still working through even today.

ZACK GUZMAN: And we might have to wait a little bit longer than people were expecting on that front too, as the latest update from Nancy Pelosi, Speaker of the House, saying she doesn't think that a deal will come this week. But we will await all of that. Brian Cheung, appreciate you joining us there.