Beginning in April 2020, small businesses and sole proprietorships had the opportunity to apply for and receive loans to cover their payroll through lenders from the U.S. Small Business Administration (SBA). These are low interest, private loans created through the Paycheck Protection Program (PPP) established by the United States federal government, through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. You can read more about the program here.
This $953 billion business loan program is intended to help businesses, self-employed workers, and nonprofit organizations to continue paying their workers. Data on this program is reported by the SBA. The latest data suggest that there are more than 10.7 million borrowers nationwide.
In the State of Michigan, there are an estimated 623,345 loans from the first round which took place from March to August 2020 (a second round of loans was disbursed from January to May 2021). The PPP loan data includes geographic information such as the location of the business the loan was applied for, including the city, state, and zip code. Information is also reported about the size of the loan. For loans under $150,000 the actual loan amount is reported. However, for the loans above this threshold, the amount is reported in ranges.
This is valuable information for us because we can use it to see patterns of where the money went and who it benefited since the program’s goal was to aid businesses that were negatively impacted by the pandemic and in turn to save jobs. Seeing where funding from the program went geographically can tell us who gained access to these resources. This is especially important to consider as Detroit was one of the most impacted cities in the US from the pandemic, in terms of not only COVID-19 cases but also the rippling impacts on employment, ability to meet daily expenses, and food and housing security.
In addition to this, it can be more difficult for smaller minority businesses to access resources like those provided by SBA. According to the U.S. Commerce Department’s Minority Business Development Agency, minority-owned businesses owners face more obstacles like difficulty in securing funding, and a lack of social capital. Minority-owned businesses are less likely to secure funding than white-owned businesses, and interest rates on funding are often higher than those for their white-owned counterparts. On average people of color have lower credit scores, and less access to capital resulting in being denied more frequently when applying for loans or receiving higher interest rates.
The SBA backed PPP loan program is said to have a goal of creating an inclusive economy that includes reaching minority-owned and other underserved communities meaningfully. That’s why in this blog we are going to be looking at the breakdown on the first round of PPP loan data for the state of Michigan from a city and county level, in addition to seeing how Detroit businesses received loans.
Loans by Amount
The approximate average loan for the state of Michigan is $228,117. This is the second highest average in the United States behind Washington DC. However, the majority of loans in Michigan were for under $150,000, with approximately 108,144 loans being in that category. Loans above $150,000 were categorized as $150,000-350,000, $350,000-1 million, $1-2 million, $2-5 million, or $5-10 million. The median loan amount for the state is $31,200. This means that while Michigan has the second largest loan average in the country most of the loans fall into the lower bucket.
Loans by County
Since population counts vary among regions in Michigan, we are using per capita to compare the amount of loans given to businesses in different counties, which provides us with a less skewed comparison. Read more about why normalizing data with per capita measurements is important here.
Oakland County received the most loans among all counties in Michigan with approximately 25,526 loans, which is about 204 loans per 10,000 people. Oakland county is the second most populated county and has the highest per capita income in the state. It is preceded by Wayne county (the most populated county), with 19,522 loans resulting in approximately 111 loans per 10,000 people. The other counties that round out the top five in the state were Macomb County with 10,819 loans for 124 loans per 10,000 people, Kent County, home to the eastern half of Grand Rapids, with 9,981 loans for 154 loans per 10,000 people, and Washtenaw County which has 4,933 loans and 134 loans per 10,000 people.
This means that Oakland County received nearly double the amount of loans per 10,000 residents as Wayne County. With the largest population we could reasonably expect Wayne County to receive more loans. However, among the counties that received the most loans, Wayne county had the smallest per capita loan count.
In terms of loan amounts, a similar trend emerged showing that Wayne County loan amounts were lower among the most populated counties. Wayne County was in the bottom 15% in the state by median loan amount, with the median loan value for businesses in Wayne county being $24,000. Ottawa County, home to the western half of Grand Rapids, had the highest median loan amount for the state at $39,573. Kent County followed in terms of median loan amount at $38,800. As mentioned previously, Kent county also had one of the highest loan counts in the state. This is along with Muskegon County at $38,440, Midland County at $37,997, and Kalamazoo County at $37,700 for median loan amounts.
Loans by City
By city, the largest loan counts came from Grand Rapids, followed by Detroit, Ann Arbor, Troy, and Lansing. The list of the top 15 loan counts in Michigan by the most populous cities is displayed below. The chart reveals an interesting allocation of loans among Michigan cities. Troy, Michigan, located in Oakland County, had the largest median loan amount with a median of $49,772. Grand Rapids had the second largest median value at $43,806, which is still more than twice the value of the median value of loans received in Detroit. Detroit actually had the lowest median loan amount among the most populated cities with a value of $20,833.
Detroit is home to the largest population in the state with more than 600,000 people. This makes the city’s population more than three times as large as that of Grand Rapids-however, Grand Rapids had many more loans per capita with 291 loans per 10,000 people compared to 84 loans per 10,000 people in Detroit.
When looking further into Detroit’s data we can see that compared to Grand Rapids, Detroit received more loans in the smallest category: Under $150,000. You can see the comparison of the breakdown of loan amount categories between Detroit, Troy, and Grand Rapids below. 87% of Detroit’s loans were in the under $150,000 category compared to 76% in Grand Rapids and Troy. 13% of Detroit’s loans were above $150,000, while 24% of Grand Rapids loans were above that amount. There is a similar distribution of loans among all loan amount categories, but the proportion of loans in the larger categories in 7.8% of loans in Grand Rapids and Troy came from the $350,000 to $1 million category while 3.76% of loans in Detroit were in that same category.
It would be interesting to look further into this disparity by looking at the count of businesses among different cities as well as the size of those businesses. With an accurate count of businesses in Detroit compared to cities like Grand Rapids we can understand more why there is a lower relative count of loans in Detroit. Fewer businesses could have applied for loans, or there could have been more smaller businesses in need of smaller loan amounts. A more cohesive data set regarding businesses in Detroit could potentially be useful in determining how equitable the PPP loan program has been.
This blog only includes data from the first round of PPP loans. More data is becoming available from the second round of PPP loans. This leaves an opportunity for more analysis as the program is said to have focused more on smaller businesses in the second round of loans.