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6 Reasons why some of Black America missed out on the PPP loan.

Updated: Nov 6, 2021

During the pandemic, most small businesses were struggling. While doing some research I saw how business experience and organization played a role in a small business’ survival. Some business’s pivoted and were able to continue making sales and keep their business open, while other small businesses decided to keep their old business plan and sadly had to close their business as a result of not adapting to the change in economy. In the black community our businesses were closing at a much faster rate. There was a study presented by the University of California Santa Cruz that showed that over 40 percent of black owned business’s closed as a result of the COVID-19 pandemic. The driving factors of the business closures were due to “lack of financial savings, and reduced access to the federal PPP loans. So…every business owner’s situation is different but there was something that I learned when looking at the twitter feeds of certified CPA’s. A common consensus was that some black owned businesses were not organized well. Here are a few problems that caused some black owned businesses to miss out on the PPP loans.

First, for those who don’t know what a PPP Loan is…PPP stands for Paycheck Protection Program that allows business entities to apply for private, low interest loans to pay for payroll and other business cost. So about Black owned businesses missing out on those PPP loans…

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1. Businesses was not registered

Sometimes in the beginning phase of a business we may start it as a side hustle or hobby. That’s normal. I believe most of us start that way because we are working a 9-5 at the same time and may not be devoting many hours into the business at the start. As the side hustle grows, and we start making money, some may have forgotten a very important step. If we are going to start a business, we should have some kind of paperwork to show that we have a legitimate business. Some of us were running business’s and had no filings with the Division of Corporations in our respective states and didn’t have an FEIN number. This prevented a lot of businesses from filing for a PPP loan.

2. “Write off your entire life on your taxes”

We have all seen the posts on social media. Create a business so you can write your life off. Sounds good doesn’t it? Well that’s not how that works. For example, let’s say your business made $600 but your tax write offs and expenses are over $25,000? Why would the feds loan you money when it really looks like you won’t be able to pay them back? There’s a saying “If you treat your business as a hobby it will pay you like one.” Which goes into the next reason why we had problems applying for and receiving a PPP loan.

3. No bookkeeper…or bookkeeping

This one was a major lesson for many businesses. There are apps like intuit QuickBooks that can help us with this. If you have a business bank account. Link the QuickBooks to your account and it can help with keeping track of your business spending and profit. If we are operating a business and don’t have a clue what our profit was for the current or previous year what proof do, we have to provide that our business is indeed profitable? Organization is key!

4. Taking profit and buying a Rolex and Gucci

One of our issues was not having enough capital in our business so that we could survive during hard times. We have heard over and over again… when you have been in business les sthan 5 years you need to make sure that you are “feeding your business” or reinvesting into it. Gucci and Rolex aren’t going anywhere. They will be here for the next 100 years, but will your business be? We have to give our businesses a chance. The year 2020 should serve as an example to all of us that we need to make sure we have capital in our business. There’s a time to grind and a time to flex; one of these options can cost you your business…soooo…..choose wisely.

5. Who’s on your payroll???

Consider this example. John has a business called John Paints LLC. John pays Salena to take pictures of his paintings for social media and the website. Salena is not on the payroll of John Paints LLC but John was planning to claim that Salena was an employee of John Paints LLC. Salena is not an employee she is actually a contractor…We have to make sure that we know the difference. Depending on your state policies, you could be fined.

6. Organized business’s didn’t apply.

Some black owned business’s did have good organization and had their bookkeeping in order but, they decided not to apply. The reason is believed to be because “they thought they would get rejected.” For this reason, some black owned businesses weren’t able to get a PPP loan and the business suffered as a result. One thing that I am learning is having a good relationship with your bank is important. In a Small Business Credit Survey by the Federal Reserve in 2019, fewer minority owned firms had a relationship with their bank compared to non-minority owned firms (See the Fed’s report Here). It can be uncomfortable to ask questions you are afraid to get the answers to sometimes; however, sometimes you may find that asking questions brings you peace of mind and options. In my opinion, if black owned business had a better or even established a relationship with their bank, they may have been better prepared to take advantage of the PPP loan.

Thank you for reading my post. I hope that this post can help us to avoid making the same mistakes that we made last year that caused us to not qualify for or receive a PPP loan. This Pandemic has wiped out over 40% of black owned businesses. Some of us had the organization, resources and relationships needed to keep businesses open and some of us did not. There are predictions out there indicating that we will have another pandemic in the future. No one knows what year or month, but we can take the lesson from last year and better organize our businesses so that we put ourselves in position to keep our businesses open. If you enjoyed this post and found it helpful, please feel free to share and if you re new to Millennial Oaks please subscribe 😊.

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