May 27. (Reuters) – Black-owned businesses were more likely to need to move outside of the traditional banking system when seeking government aid during a pandemic, and more difficult to recover than white-owned businesses if they weren’t getting help. according to a study released Thursday by the Federal Reserve Bank of New York.
The study also found that businesses in communities with a high concentration of racial minorities, often based in urban areas, experienced deeper recession and slower recovery during the pandemic than areas with fewer minorities.
The researchers found that black-owned businesses turned to fintech firms at higher rates when applying for funding under the Payroll Protection Program, which offered forgivable loans that could be converted into grants. Companies that used fintech companies to apply for PPP loans also generally requested and received smaller loans.
The analysis, based on information from small business data processing company Womply, and a survey of 9,693 small businesses by the Fed, builds on previous research showing that minority-owned businesses are harder hit by the pandemic-related restrictions and every effort tried to get government assistance early in the crisis because they lacked existing banking relationships. (Reporting by Jonnel Martha, editing by Chizu Nomiyama)