A study conducted by economists at the Federal Reserve Bank of New York found that small business owners in states most affected by the COVID-19 pandemic are less likely to receive federal relief loans compared to those in less-affected states. These states include Pennsylvania, Michigan, New Jersey and New York.
The findings reveal that less than 20% of all small businesses in New York were approved for a Paycheck Protection Program (PPP) loan. But in Nebraska, 55% were approved. The result also found that lenders prioritized borrowers they already have a business relationship with. Thus, small businesses with pre-existing relationships with banks are more likely to be approved for loans.
The New York Fed economists also found that while small businesses in California received the largest amount of PPP loans, only 25% of small business owners in the state got the money. More emergency loans went to Texas which is economically much smaller than California. This draws the ire from California Rep. Jack Speier.
A separate study by the Institute for Local Self-Reliance found that more PPP loans were approved in states where local community banks had a larger share of the financial services market. In states with the most community banks per capita, the number of emergency loans approved was almost three times more than those in states with the fewest community banks.