Amid allegations of favoritism to red states, Minnesota firms did well in scramble for federal money

Photo by Parker Michels-Boyce/Virginia Mercury.

More than 46,000 Minnesota businesses received a total of $9 billion in loans during the first round of federal small business coronavirus relief, a larger sum than most states. 

The Paycheck Protection Program loans have been critical in helping businesses in Minnesota and across the country avoid layoffs during the COVID-19 crisis. 

But the program has been rife with problems, and now an analysis of 1.6 million loans by nonprofit investigative news outlet Reveal has raised new concerns about potential political favoritism. 

During the first round of applications for the forgivable loans in early April, $349 billion ran out in 13 days. When applications for the second round opened up, the program’s computer system crashed within an hour. Dozens of large companies received millions through the program, including the Los Angeles Lakers and the companies that run Potbelly Sandwich Shops and Shake Shack, all of which announced they would return the loans. And a recent government report found that rules governing how the funds can be used may leave some businesses buried by debt.

The analysis by Reveal found disparities in the proportion of businesses that got loans in each state, raising questions about whether money was intentionally directed to states that voted for President Donald Trump in 2016 and have Republican governors.

In Trump-supporting states that didn’t have stay-at-home orders by late April, larger shares of businesses received loans during the first round of funding. North Dakota topped the list, with 58% of businesses receiving aid.

A slim minority of businesses got loans in states that implemented stay-at-home orders early and did not vote for Trump in 2016, Reveal found. Several of these states are among those hardest-hit by the pandemic, like California, where 15% of businesses got loans, and New York, where about 18% got loans.

Gov. Tim Walz is a Democrat, so Minnesota may be fortunate to have received so much money given the national picture. 

Overall, 32% of businesses in states that Trump won in 2016 received loans, compared to 22% of businesses in states that Hillary Clinton won, according to Reveal’s analysis.

Rep. Jackie Speier, a California Democrat who serves on the House Oversight and Reform Committee, told Reveal that she would call for an investigation by the Government Accountability Office in response to their reporting. 

“If it is as it appears, it is downright criminal. So there has to be an investigation,” Speier said.

Miryam Mora Barajas, a spokesperson for the Small Business Administration, told Reveal that the agency is treating all businesses fairly based on a first-come, first-served system.

Explore the charts below for a closer look at the first round of small business loans.