Yes, Senator, Small Businesses Do Need More Help to Survive This Pandemic
Earlier this week, Venkat, our president, came across a clip of US Senator Pat Toomey singing the government’s praises for the success of the PPP. His reasons? The main street lending program still has funds left and hasn’t been accessed by midsize borrowers because they’re finding other ways to get credit. Or so he hopes.
As we chatted about the video, one thing stood out to us—he was wrong.
The Senator wanted data before he said for certain that he was right about glorifying the PPP. Conveniently, we have it, and it doesn’t exactly line up. According to our data:
- 43% of small businesses who received PPP funds will run out of cash in the next 30 days.
- 69% of those who didn’t receive money from PPP will be in the same boat.
In other words, small business owners aren’t out of the woods yet, so stop patting yourself on the back for a job well done.
The problem is that he misunderstood what really happened with the PPP and how it affected small businesses, who aren’t as well capitalized as big companies. In other words, he lumped us in with big business when we face very different challenges. The PPP is about more than stimulating the economy. For small businesses, it’s about survival.
In short, he’s blind to the needs of small business. And it showed.
Take a look at the clip from CNBC below and see what you think.
3 Big Things Washington Got Wrong About PPP—and What You Can Do About It
Clearly, the folks in Washington are missing something. Let’s take a look at what they got wrong and how you can take action to help small businesses get the help they need.
1. By the time the Flexibility Act passed, it was too late
The Flexibility Act expanded the timeline for using the funds from 8 weeks to 24 and reduced the percentage you need to spend on payroll from 75% to 60%. The problem? By the time they rolled it out, it was too late.
That’s the case for Karen Bailey from Bailey’s Travel.
For those of us who received the loan the first of April, we were told money had to be used within 8 weeks. So the extension doesn't help us, as our time ran out.
Up until that point, businesses had to use the money in eight weeks to qualify for forgiveness. When the Flexibility Act passed on June 8, many were nearing the end of that period and had used the money already. And if they wanted the loan to be forgiven, they were using it primarily for payroll while the new act allowed them to direct the funds elsewhere.
But once you’ve spent 75% of your loan for payroll, there’s no going back, which means less money for expenses, like rent, utilities, and so on. And for some business owners, no money to run on at all.
What you can do about it: Hop on the phone and call your senator or representative. Let them know:
- The Flexibility Act was too little, too late.
- Small businesses will need more help going forward or many won’t survive, which is bad news for the economy.
- Make more funds available for purposes other than just employment.
+ Find your senator's contact info here
2. The money wasn’t fairly distributed
After big banks prioritized loans for large corporations, many small businesses became understandably distrustful of the program.
Carolyn Sames from Universal Staffing Inc sums it up:
My business is 27 years old. It’s my retirement and my life. Chase is destroying small businesses day by day... We will survive this only with the help of other small business owners. Let’s support each other and dump large banks.
What made matters worse is that the loans were disproportionately handed out: Younger businesses and minority-owned and women-owned businesses were approved at lower rates.
Our data showed that:
- Only 54% of minority-owned businesses were approved as compared to non-minority businesses with a 76% approval rate.
- Only 69% of women-owned businesses were approved.
Essentially, if you have a relationship with a bank as a more established business or a non minority-owned business, you’re golden. If you’re a minority-owned business or someone who uses the big national banks, you’re out of luck.
The transparency problem: Initially, the government wasn’t planning on releasing their data on who received the money, but they’ve since withdrawn that.
Now, they're stating that they’ll disclose the businesses who received over $150,000 including their names, addresses, and demographics. For those who received less, they’ll share demographic information, industry type, zip code, and type of business, according to the Wall Street Journal’s write-up.
What you can do about it:
- While they said they’d release the data, they didn’t say when. So keep the pressure on Washington for transparency and hold them accountable.
- And if you haven’t already, ditch your large money center bank for a local one. The big ones don’t deserve our business.
3. Just because $120 billion is left doesn’t mean small businesses don’t need the money
Calling the PPP a success because there’s still money left is misguided at best. It’s not that small businesses are suddenly recovering their lost revenue or accessing private capital. It’s that the government dropped the ball.
First off, small businesses don’t have the same access to capital as larger ones do, and lending to them is riskier. That hasn’t changed because of the pandemic. In fact, it’s probably gotten worse.
And given our earlier data, small businesses are running out of cash at rapid rates, even when business is starting to pick up again, like Michelle Schneider from Optimal Hormone Health and Wellness:
I am just about to run out of the PPP money and am not sure I will be able to continue to pay my one employee. My business has improved but is still down about 60-70%. Will there be an opportunity to obtain a second PPP grant?
Rather than congratulate themselves, the government should get back to work and fix the problem. Or thousands of small businesses go under, and the jobs and economic boost they provide go along with them.
What you can do about it:
- If you’ve haven’t applied for PPP, urge your reps and senators to extend the deadline. Remember, here's the contact information for your senators and for your representatives.
- And if you have and are still struggling with reduced demand, ask them to add more money and more time to use it.
Here are our policy recommendations: What are yours?
To ensure that small businesses recover, we think the PPP could benefit from some updates. Here’s what we’d propose:
- Extend the deadline for accessing funds
- Adjust the timeline so businesses can use their money longer
- Introduce blanket forgiveness for loans under a certain amount
- Be transparent around disparities for minority-owned and women-owned businesses and introduce new lenders who have historically demonstrated dedication to underserved communities
What’s on your list of recommendations? What would you change about the PPP?
Comments (1-10)
Its very unfortunate that small businesses take all the pain and suffering. They do most of the leg work. Its also true to do business with local small banks and credit unions. Small local banks want your business and give you better customer service. In these times, we need much more funding for us small guys.
For small businesses that are new and don’t take money out for payroll, it has been a huge disappointment that we don’t qualify for anything. Most of the business owners I know are sucking it up and riding it out for that reason. This is not addressed adequately even in this article. As a woman and a business owner who has paid for everything out of pocket, this seems more than a little ridiculous. So tell me where is that support? I loved your article and it indicates to me that you are very concerned and in touch with most of the issues. Please add a question on your survey to reflect it and you will find out why PPP still has funds.
Everything I was reading was right. I am open but the money I am making doesn’t cover my payroll salaries. I am in child care and they cut the number of children I can have in half. I had the PPP loan which helped my employees while we were closed but now we are back open and it has run out. Small businesses need more help now that we are open. Because this virus is crushing our businesses
We are in the moving and storage business. Our business slowed significantly in the early stages of the pandemic and we cut hours and pay and our rent was exorbitant during these slower times. We were approved for PPP during the second phase but now that the time frame is at the end of the eight weeks, our business is still not at full capacity, it would be helpful if they would approve an additional PPP grant.
Introducing blanket forgiveness for loans would be great. I took a SBA loan to keep my business expenses paid during this pandemic. The money is almost gone and I do not want to take out another because I know I have to pay this money back. My business is down by 90%. I am praying September brings us closer to back to normal business.
The SBA was obviously to slow to react and they sat in there offices and tried to make decisions as to who to get needed money to. Someone should have gotten off there duff and into the field and been able to authorize the loans from the field upon an in person meeting with small business. Reactive not passive.
The restrictions and many people out of work has nearly shut my business down 100%. In my industry people want to meet you face to face and that’s nearly impossible these days. In addition,people’s expendable income is down because many people are out of work or have seen their incomes cut because of the Plandemic.
I believe that the PPP should be reallocated, and businesses who already have loans should receive at least 6 months of funds instead of 2.5. Businesses applying for loans should be eligible for the full 6 months. This virus isn't going anywhere an will continue to impact us through the end of the year.
The amount we received was based on older smdata and didn’t take into account our growth in last 3 months and as such the PPP we received only lasted about 6 weeks. I would have like it to be based on your most expensive months instead of majority average was lowest.
My business that I started in 1995 is doing no business since March. I don't expect any new business until September at the earliest . I own a DJ music service. No gatherings no business.