There’s little in it for the banks to provide the kinds of very small loans that these businesses need, so that’s one part of the problem. “The really small businesses, the businesses with one employee, the businesses owned by people of color, they need super-small loans,” said Ashley Harrington, director of federal advocacy at the Center for Responsible Lending. “The way the PPP is structured, banks are paid an origination fee based on the size of the loan. The size of the loan is based on the size of the payroll. If we want to incentivize banks to serve the really small businesses and the businesses owned by people of color, the origination fee has to match that.”
Meanwhile, Sens. Marco Rubio, a Florida Republican, and Ben Cardin, a Maryland Democrat, are still trying to keep the PPP alive, and to reconfigure it for assistance to the businesses that have been left out. But they still are relying on the banks, looking at a tweak that would provide longer-term loans for businesses that operate in low-income communities and that would set aside $25 billion specifically for those with 10 or fewer employees. But it’s still keeping the banks in the loop, which is a problem. They don’t want these little loans, and the application process is a barrier for many. “Just the weeks that went by between those time periods could be the difference between the life and death of a business,” said Henry McKoy, director of entrepreneurship at North Carolina Central University’s business school.
There’s been some improvement in the program since it was implemented in March; at least lawmakers have been trying to direct more of the funds to lenders working in underbanked communities and loosening restrictions for some borrowers, including those who had criminal records. It’s made some difference. “You hear the stories, but to live it, to be that ‘African American disadvantaged minority business owner’—imagine being that disadvantaged owner with a criminal record, during a time when unemployment is going sky high not just for African Americans but for everyone,” said Altimont Wilks, who finally got a loan last week for his Hagerstown, Maryland business. Wilks had a 2004 conviction and had been barred from the funds until a federal judge ordered the Small Business Administration to reserve funding for him.
“We did better as the program went along. What the final result is, we don’t know yet,” Cardin told Politico. “The good news is both Senator Rubio and I believe we need to target funds to the underbanked and underserved communities.” That is good news. Better news would be converting the remainder of unspent PPP funds—and the additional $50 billion proposed by Booker, Daines, and Kildee—and turning it into grants.