Magic Johnson and his company EquiTrust Life Insurance are offering $100 million in loans to minority-owned businesses struggling to survive amid the economic crisis caused by the spread of COVID-19, according to the Wall Street Journal.
Black-owned businesses have received little help from the federal government and have been repeatedly shut out of funding trickling through the Small Business Administration’s Paycheck Protection Program.
But now, Johnson's EquiTrust Life Insurance will work with MBE Capital Partners to provide loans through the Paycheck Protection Program.
On MSNBC, Johnson and Rafael Martinez, MBE Captial Partners' majority owner, spoke with Al Sharpton about the program and their goal to help 100,000 minority-owned businesses.
"This is two powerful companies coming together to make sure these women-owned, minority-owned businesses can still survive and thrive during this virus and during this time. I built my business in urban America, in the inner city and I was once one of those small business owners. So, I know how important it is to keep those employees working, keep those Black and brown people working in those small businesses in our community,” Johnson told Sharpton.
“And we can’t afford to let these people lose their businesses who have been working so hard to build their business and we want to help them grow their business and have scale because that’s what’s important. Because if they get scale, then they can hire more people, and the more people working the better for our community because we know how high unemployment is in our community and this virus really affected our community in two different ways — health-wise as well as financial wise.” Johnson added.
There has been increasing outrage over the Paycheck Protection Program, with dozens of complaints about the application process and those who managed to get loans without needing them.
The loans were meant for small businesses, yet larger companies like Shake Shack and the Los Angeles Lakers were able to obtain millions in PPP loans, sparking backlash and forcing some corporations to give back their loans.
Nearly 250 publicly traded companies got large loans through the program, and Treasury Secretary Steven Mnuchin later appeared on CNBC to apologize for the mix-up and announce more stringent rules, according to Business Insider.
Despite the outrage, many companies decided to keep the money, according to CNBC. Conversely, women-owned and Black-owned businesses barely received any help at all.
"Based on how the program is structured, we estimate that upwards of 90% of businesses owned by people of color have been, or will likely be, shut out of the Paycheck Protection Program," Ashley Harrington, director of federal advocacy and senior council for the Center for Responsible Lending, told CBS News.
"Roughly 95% of Black-owned businesses, 91% of Latino-owned businesses, 91% of Native Hawaiian or Pacific Islander-owned businesses, and 75% of Asian-owned businesses stand close to no chance of receiving a PPP loan through a mainstream bank or credit union," the center said on April 6.
Outside of that issue, there were larger concerns, and outright accusations, that the banks in charge of doling the money out were essentially giving it out to bigger companies that did more lucrative deals with them instead of smaller businesses.
Dozens of small businesses have now teamed up to file a lawsuit against Wells Fargo & Co., Bank of America Corp., JPMorgan Chase & Co. and U.S. Bancorp, stating those banks shut them out of the process by prioritizing businesses with larger loans, according to Bloomberg.
Another lawsuit states the banks used the PPP program to "maximize loan-origination fees and their own profits," according to CBS News.
Congress approved another $310 billion in loans for the end of April, but there have been similar problems with that batch as well, NBC News reported.
“We knew why the money was gone and couldn’t trickle down to small businesses, especially small minority businesses, because they didn’t have those great relationships with the banks. So this was easy for us to understand,” Johnson told the Wall Street Journal.
“What we’re launching here now is so important because we’re going to save a lot of small, minority businesses because they can’t just walk into the bank and get that loan,” Johnson added.