Report: Nearly half of LGBTQ-owned businesses denied COVID relief loans

Victoria A. Brownworth

The federal government provided relief loans during the height of the COVID-19 pandemic, which shut down many small businesses. Paycheck Protection Program (PPP) loans are available through May 31, 2021 through the U.S. Small Business Administration.

New data from the Center for LGBTQ Economic Development and Research (CLEAR) and the Movement Development Project (MAP) shows that small businesses with LGBTQ ownership are far less likely to receive COVID-19 benefits than non-LGBTQ businesses.

However, LGBTQ-owned businesses have higher application rates, the researchers said.

The CLEAR and MAP report analyzes data from the Federal Reserve Bank’s annual Small Business Credit Survey (SBCS). In 2021, the data includes questions about LGBTQ identity for the first time. Using data from SBCS, CLEAR and MAP “an unprecedented look at the finances and needs of LGBTQ-owned small businesses”.

Financial experts told USA TODAY that “the average LGBTQ-owned small business is in poor economic shape” when applying for COVID-19 relief, although as USA TODAY reports, Congress says it is “directing funds to the smallest businesses” and minority businesses. “

“Historically, lenders have been barred from making loans to LGBTQ-related businesses, and this precedent continues to influence loan application decisions,” USA Today reported.

USA TODAY notes that the ban is “a rule on the SBA books that states that businesses that derive income from products or displays featuring ‘lewd sexual conduct’ are ineligible for loans.” The formal “don’t speak gay” that applies to business loans.

“The importance of LGBTQ-inclusive data collection cannot be underestimated,” MAP senior policy researcher Logan Casey said of the report. “… LGBTQ-owned small businesses have unique experiences, including marked differences in how financial institutions treat them and how they continue to be impacted by the COVID-19 pandemic.

“The findings also illustrate the clear needs and opportunities to better support these businesses and the rich local communities they serve,” added Casey.

A key element of this report is that while PPP loan applications offer applicants the opportunity to highlight that they are female-owned, minority-owned, or veteran-owned, the SBA does not have a corresponding section for business owners to describe their LGBTQ-owned businesses .

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The data analyzed showed that LGBTQ businesses were generally equally likely to apply for a loan or financing, but were less likely to receive one. According to the report, “About 46 percent of LGBTQ-owned businesses reported that they did not receive any financing they had applied for in the past year.” By comparison, only 35 percent of non-LGBTQ businesses applied for funding.

The report notes that discriminatory practices appear to be embedded in lenders’ responses: “Notably, LGBTQ-owned businesses were more likely than non-LGBTQ businesses to explain their rejections as a result of lenders not approving financing for ‘businesses like them’ (33% vs. 24%) etc.”

While loan providers may not discriminate against businesses because they are LGBTQ, Casey explained that the sheer number of LGBTQ businesses denied loans “indicates potential systemic economic discrimination.”

The data showed that while LGBTQ businesses were more likely to apply for pandemic relief, they were less likely to receive it. The majority (57%) of LGBTQ-owned businesses applied for relief through the PPP, compared to 47% of non-LGBTQ businesses. LGBTQ businesses have much higher rejection rates: 1 in 6 LGBTQ businesses (17%) report that they have not received any funding they applied for in 2021, compared to only 1 in 10 non-LGBTQ businesses (10%) .

In theory, LGBTQ small businesses should receive more funding than non-LGBTQ businesses that are “more likely to be women-owned and immigrant-owned. More LGBTQ-owned companies are also majority-owned by women (34 percent of LGBTQ companies versus 20 percent of non-LGBTQ companies) and majority ownership is owned by immigrants (21 percent versus 15 percent),” according to the data analyzed.

Another surprising data point from the study is that CLEAR and MAP report that “despite stereotypes about where LGBTQ people tend to live and thrive, the largest share of LGBTQ businesses is in the South (31%), while LGBTQ businesses It is also about the same likelihood of non-LGBTQ businesses operating in rural areas.”

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The Philadelphia Gay News previously reported that LGBTQ people are disproportionately affected by COVID-19, and that LGBTQ households are twice as likely to not be able to receive necessary medical care and not to have enough food to eat compared to non-LGBTQ households family four times.

Compared to non-LGBTQ families, LGBTQ families experience higher unemployment, severe financial problems, problems accessing healthcare, and more challenges with homeschooling for their children.

These disparities were even more pronounced for Black, Latino and low-income LGBTQ groups, reflecting broader national trends in who have been particularly affected by the pandemic. Therefore, these new data on LGBTQ-owned businesses parallel the earlier data.

The report shows that more LGBTQ businesses are financially impacted by the COVID-19 pandemic, with 61% of LGBTQ companies reporting financial losses in 2020, compared to 48% of non-LGBTQ companies.

In 2021, the disparity not only continued, but further exacerbated: 85% of LGBTQ companies reported that the pandemic had negatively impacted their business during the survey period, compared to 76% of non-LGBTQ companies.

“LGBTQ+ small businesses are the engine of self-help for the LGBTQ+ community,” CLEAR President and Executive Director Spencer Watson said in a statement. “Financial inequality in LGBTQ-owned small businesses contributes to food insecurity, housing insecurity and worse for LGBTQ+ people in the United States. health status.”

Watson added, “Improving financial equity for LGBTQ-owned businesses will support the economic vitality of LGBTQ+ workers, communities, and the entire U.S. economy.”

Victoria A. Brownworth is a reporter for Gay News in Philadelphia, where this story first appeared.

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