LGBTQ-owned small businesses received COVID-19 relief funds at a lower rate than their non-LGBTQ counterparts, even as they were more likely to apply for loans during the pandemic, according to researchers.
Even if loan providers weren't discriminating against businesses because of their LGBTQ ties, the percentage of businesses rejected for loans indicates underlying systemic economic discrimination, said Logan Casey, a policy researcher at MAP.
Historically, lenders have been prohibited from making loans to LGBTQ-related businesses, and that precedent is still affecting loan application decisions, Watson said.
When Lisa Smith, who owns Compass Tea Room in Luray, Virginia, was rejected in fall 2020 for a $2,500 PPP loan that would have helped pay utility bills, her best remaining option was to sell her home and move into the back storeroom of her business with her dog, Loki. “Economic insecurity at higher levels in our community to start with, that makes for businesses being on rockier footing to start with. And then continuing to face that discrimination in financing becomes a self-fulfilling prophecy," Casey said.
Banks"trusted their large partners" during the pandemic, leading to many loans being given to "large businesses that didn’t really need it but were probably good bets," Watson said.