What Drove Racial Disparities in the Paycheck Protection Program?

Sep 10, 2023

We would like to make two points in response to your comments. First, in the Staff Report (https://www.newyorkfed.org/research/staff_reports/sr1060.html) on which this blog post is based, we explain in detail the eligibility and documentation requirements of the PPP application process. While the actual application form was short, as you note, it could be far more onerous to prepare the additional documents often needed to substantiate eligibility and loan requests, which were not limited to only tax returns. Among other things, these documents could include third-party verification of contributions to benefits programs, articles of organization or incorporation, and profit-and-loss statements. Our paper presents both anecdotal and statistical evidence that many small firms, not just Black-owned firms, faced difficulties in navigating the PPP application process. Moreover, in both our staff report and in this blog post, we argue that the disparate impact of administrative burdens on Black-owned firms is likely driven by disparities in access to professional services; we do not claim that Black- or other minority-owned businesses were less capable of navigating the complexities of the PPP application process.

Second, as you note, firms without paid employees and with no taxable income in 2019 were not eligible to receive PPP loans in 2020. We directly control for this in our statistical analysis, and our results are thus not driven by rejections of this nature.

Posted by: New York Fed Research | June 5, 2023 at 10:29 am