Black-owned small businesses were much less likely to receive federal coronavirus relief loans from small banks than they were from online lenders, a new study concluded.
Researchers found that Black-owned small businesses were 70 percent more likely to get Paycheck Protection Program loans from online companies, probably because those lenders — known as financial technology companies, or fintechs — use automated systems that don’t have the racial biases that small bankers may bring to the table when approving borrowers for loans, according to the New York University study.
The research “presents the possibility that there may be benefits from a racial equity standpoint to removing humans and all of the biases, both conscious and unconscious, that come along with human decision-making from the lending process,” said Sabrina Howell, an assistant professor of finance at NYU’s Stern School of Business and a co-author of the report.
The Paycheck Protection Program (PPP) was launched under the Trump administration to provide forgivable loans to businesses that rehired or kept workers on their payrolls. It was part of a package of measures meant to bolster the worsening economy during the pandemic. But an analysis of $517 billion in emergency small-business loans found that a majority went to larger businesses, whi
Read Full Article at www.washingtonpost.com