For small businesses, forgivable loans offer a lifeline, again

The Small Business Administration (SBA) is targeting women-owned businesses, veterans, people of color, and businesses in some rural communities with the relaunch of a massive lending program aimed primarily at providing businesses with a lifeline of business. free money to survive the pandemic.

On Monday and Tuesday, first-time paycheck protection program borrowers working with specialist community financial institutions can begin processing small business repayable loans. Other lenders will be able to join the program in the coming days.

The SBA has designed a gradual reopening of PPP with the aim of prioritizing access to capital in “underserved communities” – from rural areas to businesses owned by women, minorities and veterans.

“We really want to make sure that we are growing our smallest of the smallest businesses, [like] minority-owned businesses, ”said Robb Scott, Great Lakes Regional Administrator for the Small Business Administration. “[Businesses] who are disadvantaged because, around the first PPP cycle, they did not have a relationship with a financial institution.

The Paycheque Protection Program (P3) was created to help small businesses pay workers and cover other costs to survive the economic downturn caused by the coronavirus. The PPP has been dormant since August, but as of this week a new prize pool is available for qualifying small businesses.

Current PPP funding represented nearly a third of the $ 900 billion coronavirus economic stimulus package passed by Congress in December. There are $ 284 billion in repayable small business loans available.

As of August 8, 2020, over 128,000 Michigan businesses (that’s more than about one in seven small businesses statewide) had been approved for potentially recoverable PPP loans worth more than $ 16 billion.

Small business advocates and SBA officials say there is pent-up demand for more relief.

“There are certain industries that I think almost universally businesses will qualify for. [for a PPP loan]Said Brian Calley, former governor of Michigan Leitant and current president of the Small Business Association of Michigan. “And I think for a lot of these companies that will literally be the difference between doing it and not doing it.”

In the first round of PPP financing, smaller, relatively larger companies and those with previously established banking relationships were able to dominate the first round of PPP financing. At the start of the pandemic, there were controversial headlines when companies like the Los Angeles Lakers were approved for PPP loans (they eventually got repaid the loan). Scott says cases like this were rare, and today the national average PPP loan amount is close to $ 80,000, which he says indicates that small businesses are taking advantage of forgivable loans.

Among the changes to PPP in the law passed late last year, while most businesses can borrow up to 2.5 times their average monthly payroll in a PPP loan, restaurants can now borrow up to 3.5 times their average monthly payroll. The maximum loan amount is now lower and borrowers must prove that they have suffered a loss of income in order to qualify for the PPP.

“I think there’s a much better chance that the money will get where it’s supposed to be and that [funding] won’t run out as quickly as it was first introduced in 2020, ”Calley said.

All PPP borrowers are required to spend 60% of the loan on salary expenses. The remaining 40% can be used to cover a wider range of expenses. Business borrowers can pay rent and / or use PPP to pay for PPE for their business and employees, without losing their loan forgiveness eligibility.

Some PPP borrowers will be eligible for a second PPP loan, if they can prove that they experienced a 25% drop in income for any fiscal quarter of 2020 compared to 2019.

Will outreach to “underserved communities” work?

The PPP was always supposed to prioritize businesses in “underserved or rural areas” where it might be difficult for borrowers to access capital. According to NPR, lawmakers initially set aside $ 30 billion in PPP funding for small lenders, in part with the intention of helping small minority-owned businesses. A May 2020 report from the SBA Inspector General said there was no proof these companies have been prioritized.

Rob Scott says that in his Great Lakes region, SBA officials have made efforts to reach out to organizations in underserved communities to work through networks to disseminate information on how to apply for the PPP.

“It’s kind of like everyone on the bridge using as many resources, as many platforms as possible to reach them,” Scott said. “At the end of the day, it’s up to this small business owner to educate himself in order to find the resources. We are here.”

Business owners can find the latest guidelines and information on PPP applications at

The SBA says raising awareness among these groups of business owners is now a priority and the reason for reopening at several levels prioritizing first-time borrowers working with community financial institutions, specialist lenders who typically have lower loan limits.

No one knows how much money from previous P3 funding rounds went to business owners of color, women entrepreneurs and other businessmen in underserved communities. It’s voluntary for PPP borrowers to disclose demographic information about themselves, and Scott says it’s illegal for the SBA to require this information from borrowers.

With the PPP reopening this week, SBA administrator Carranza released guidelines detailing the actions the SBA is taking to prioritize underserved communities now.

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