Harris highlights racial disparity in distribution of PPP loans but misstates Michigan stats

While campaigning in Flint, Michigan, and Detroit, Sen. Kamala Harris, D-Calif., emphasized the importance of ensuring a high turnout among Black voters to help elect Democratic presidential nominee Joe Biden.

During a Sept. 22 interview with the Detroit TV station WDIV, Harris, Biden's running mate, discussed the racial disparities revealed by the coronavirus pandemic and the ensuing economic recession, which has hit Black-owned businesses particularly hard.

"I looked at the numbers in terms of the restaurants that received the benefit of the PPP in Michigan, and only one Black restaurant received it of the hundreds of others that received it," Harris claimed.

"You cannot deny fact, and where there are disparities, they need to be addressed," she said.

Researchers say Black-owned businesses have been hit hard during the current recession and have confronted barriers to accessing aid under the Paycheck Protection Program, a federal coronavirus relief program that offers low-interest loans to businesses to help cover payroll and expenses like rent or mortgage payments.

But Harris’ claim on the numbers is incorrect. It’s based on outdated and incomplete data. More current data shows at least 29 Black-owned restaurants in Michigan have received Paycheck Protection Program loans.

The campaign shared a Jul. 16 article published by the Detroit Free Press to back Harris’ claim. It reported that of the 785 Michigan restaurants that had received a Paycheck Protection Program loan greater than $150,000, only one was listed as Black-owned. That was according to an analysis of program loan data from the Small Business Administration. 

The article did not include the number of Black-owned restaurants in Michigan that received a loan under $150,000, and it noted that many Paycheck Protection Program recipients did not report racial demographic information.

The latest data show that the number of Black-owned restaurants receiving loans of any size from the program has increased since this analysis was conducted, though it still lags behind the number for white-owned restaurants.

Updated data show that of the 6,778 Michigan restaurants that received a Paycheck Protection Program loan as of Aug. 8, only 1,265, or about 19% reported racial demographic information. Of those, there were three Black-owned restaurants that received loans greater than $150,000, compared with 223 white-owned restaurants; and 26 Black-owned restaurants got loans under $150,000, compared with 804 white-owned restaurants.

So among Michigan restaurants that received a Paycheck Protection Program loan and reported racial information, about 2% were Black-owned and about 81% were white-owned.

The vast majority of recipients did not report racial demographic information. That alone makes it impossible to say definitively, as Harris did, how many Black-owned restaurants have benefited from the program.

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Black-owned businesses have been hit hard by the coronavirus-induced economic recession, and they have faced barriers in accessing Paycheck Protection Program loans. Among all types of businesses, those with Black owners have been twice as likely to close during the pandemic, according to a recent report from the Federal Reserve Bank of New York.

"These firms had weaker financial cushions, weaker bank relationships, and preexisting funding gaps prior to the pandemic," said Claire Kramer Mills, assistant vice president at the New York Fed. "COVID-19 has exacerbated these issues, and businesses in the hardest-hit communities have witnessed huge disparities in access to federal relief funds and a higher rate of business closures."

Although the study found that businesses in counties most impacted by Black business closures received PPP loans at a similar rate as businesses nationally, there was significant variation among the counties. In Wayne County, Michigan, for instance, only 11.6% of firms received Paycheck Protection Program loans, compared with 17.7% of businesses nationally.

Researchers have identified other racial disparities in access to loans from the program.

Research from the National Community Reinvestment Coalition, an association of community-based organizations championing fairness in banking, found evidence of lending discrimination based on the race of the applicant for a Paycheck Protection Program loan.

Small businesses in majority-white neighborhoods received Paycheck Protection Program loans more quickly than in majority-Black neighborhoods, according to a report from the nonpartisan think tank Brookings that looks at the most recent loan data.

Black-owned firms tend to lack strong relationships with banks, especially traditional banks that were initially relied upon to deliver Paycheck Protection Program loans, and entered the current recession in a weaker financial position, which helps explain the high rate of closures among Black-owned businesses and barriers to support.

"Senator Harris is making the important point that during COVID-19, Black communities and small businesses have been disproportionately impacted," Ben Halle, Michigan communications director for the Biden-Harris campaign, wrote in an email to PolitiFact Michigan. 

Harris claimed that only one Black-owned restaurant in Michigan received a Paycheck Protection Program loan.

Her claim was based on old data and referred only to restaurant owners who reported racial demographic information and received loans greater than $150,000.

According to the most recent SBA data, at least 29 self-identified Black-owned restaurants in Michigan have received a Paycheck Protection Program loan, far fewer than the number of white-owned restaurants. And there’s other evidence of racial disparities in access to loans from the program nationwide. But the vast majority of loan applicants in Michigan did not provide racial data, making it impossible to determine how many Black-owned restaurants in the state benefited from the program.

Harris’ claim contains an element of truth, but ignores critical facts that give a different impression. We rate this claim Mostly False.

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