May 27 (Reuters) - Black-owned businesses were more likely to need to go outside of the traditional banking system when seeking government aid during the pandemic and they had a harder time recovering than white-owned businesses if they didn’t receive assistance, according to research released on Thursday by the Federal Reserve Bank of New York. The research also showed that businesses in communities with high concentrations of racial minorities, often based in urban areas, faced a deeper downturn - and slower recovery - during the pandemic than neighborhoods with fewer minorities. Black-owned businesses turned to fintech firms at higher rates when applying for funding from the Paycheck Protection Program, which offered forgivable loans that could be converted into grants, the researchers found. Businesses that used fintech firms to apply for PPP loans also generally asked for and received smaller loans. The analysis, based on information from small business data processing firm Womply and a Fed survey of 9,693 small businesses, builds on previous research finding that minority-owned businesses were hit harder by pandemic related restrictions and struggled to tap into government aid early on in the crisis because they lacked existing banking relationships. (Reporting by Jonnelle Marte Editing by Chizu Nomiyama) Our Standards: The Thomson Reuters Trust Principles.