Racial Disparities in the Paycheck Protection Program

45 Pages Posted: 20 Aug 2021 Last revised: 7 Feb 2023

See all articles by Sergey Chernenko

Sergey Chernenko

Purdue University - Department of Management

David S. Scharfstein

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: August 18, 2021


We document significant racial disparities in borrowing through the Paycheck Protection Program (PPP) and investigate the causes of these disparities. In a large sample of Florida restaurants, Black-owned restaurants are 25.5 percentage points less likely to receive PPP loans. Restaurant location explains 6.5 percentage points of this differential. Restaurant characteristics explain an additional 9.8 percentage points of the gap in PPP borrowing. The remaining 9.2 percentage points disparity is driven by a 16.8 percentage points disparity in PPP borrowing from banks, which is partially offset by greater borrowing from nonbanks, largely fintechs. Disparities in PPP borrowing cannot be attributed to lower awareness of PPP loans or lower demand for PPP loans by minority-owned restaurants. We use a broader sample of firms that were likely eligible for PPP loans to show that our findings apply more broadly across industries and are not limited to Florida. In counties with more racial bias, Black-owned firms are significantly less likely to receive bank PPP loans and to substitute to nonbank PPP loans. This substitution, however, is not strong enough to eliminate racial disparities in PPP borrowing.

Keywords: discrimination, Paycheck Protection Program, Economic Injury Disaster Loans, bank lending, nonbank lending

JEL Classification: G21, G23, G28, H84, H81

Suggested Citation

Chernenko, Sergey and Scharfstein, David S., Racial Disparities in the Paycheck Protection Program (August 18, 2021). Available at SSRN: https://ssrn.com/abstract=3907575 or http://dx.doi.org/10.2139/ssrn.3907575

Sergey Chernenko (Contact Author)

Purdue University - Department of Management ( email )

West Lafayette, IN 47907-1310
United States
(765) 494-4413 (Phone)

HOME PAGE: http://www.sergeychernenko.com

David S. Scharfstein

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-496-5067 (Phone)
617-496-8443 (Fax)

HOME PAGE: http://www.people.hbs.edu/dscharfstein/

National Bureau of Economic Research (NBER)

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