Small businesses need more from Congress and agencies in COVID-19 emergency funding

The $2 trillion federal stimulus plan enacted late last month to help businesses and individuals impacted by the COVID-19 pandemic is already overwhelmed and falling short. Congress authorized nearly $350 billion in forgivable loans and the Senate is expected to vote Thursday on an additional $250 billion so small business owners can pay employees and remain in business during this crisis.

NCRC supports these efforts, but more needs to be done. Some banks have already received all the Payment Protection Program (PPP) applications they are willing to handle and have closed to new requests. Others are still working through logistical requirements to process emergency loans. Bigger businesses and bigger loans are likely to get priority while smaller businesses are left out. In particular, Congress should clarify the information required of lending institutions to help small businesses qualify and should widen the pipeline for distribution of these funds, giving federally-regulated entities like CDFI’s a chance to play their trusted roles in assisting small businesses to recover.

Jesse Van Tol, CEO of the National Community Reinvestment Coalition (NCRC), and John Taylor, Founder and President of NCRC, made the following statements:

Jesse Van Tol

“Congress will need to invest more, that’s clear. But we’re also seeing problems with how the money is distributed, who’s getting it and who isn’t. Big companies have already lined up for their PPP loans. Smaller ones are still trying to figure out how the program works – and some banks have already closed to new applications.

“The loan application rules also need to be clearer – and be reasonable. Some SBA lenders are requiring more documentation than others, and that’s a critical problem when a lender asks for paper records from a small business owner who can’t get into their business.

“I’ve also heard SBA is about to change its fee structure, which initially paid banks a higher fee for smaller loans. That was an incentive to serve smaller businesses. If SBA moves to a single percentage fee for all loans, banks will focus on making bigger loans to bigger businesses. Regulators need to step in and make sure this doesn’t happen, and they need to be clear and aggressive about that now.”

John Taylor

“We’ll need more money invested to keep small businesses afloat. But we’ve also got to watch out for rules that make it harder for small businesses to get loans, and for lending discrimination, which was well documented before COVID-19. If regulators don’t take this into consideration, minority small businesses will be disproportionately affected, likely resulting in an even greater expansion of the racial wealth divide.

“Congress and the Treasury Department need to move swiftly to address glaring holes in the PPP to ensure government funds reach the most vulnerable of businesses. Congress should expand the pool of lenders qualified to make PPP loans, including Community Development Financial Institutions (CDFIs). CDFIs have a long record of lending to small businesses, including in traditionally underbanked communities.

“Banks need to open PPP applications to non-clients in order to meet the demand. 98 percent of all businesses in the U.S. have fewer than 20 employees. If they can’t tap into these programs, they will be out of business. If PPP doesn’t reach small businesses, they will vanish and local economies will be crushed. To contain unemployment and further economic disaster across the U.S. and among our most vulnerable populations, we must ensure these businesses can access the PPP.