More help is theoretically on the way for small businesses struggling due to the coronavirus pandemic’s economic blow. The House passed a relief package Thursday, allotting about $484 billion for small businesses hurt by the coronavirus, as well as for hospitals and expanded testing. However, after the first relief package ran out quickly and did not go to most minority-owned small businesses, many are skeptical of this second package as well.
Earlier this month, the Paycheck Protection Program (PPP) ran out of funds, and the Trump administration had been under pressure to replenish it since. The Small Business Administration (SBA) had approved more than $342 billion worth of loans. However, criticism of the program has been that banks have been prioritizing loans for existing customers and large restaurants, leaving little access to funds for many small businesses. The PPP is designed to provide an incentive for small businesses to keep workers on the payroll by forgiving loans if employees are kept on the payroll for eight weeks and the loan money is used for payroll, rent, mortgage, interest or utilities.
Adrienne Trimble, president of the National Minority Supplier Development Council (NMSDC) told DiversityInc that the allotment of the first round of funds was flawed, and that there is also a chance this round could run into the same issue. Of the NMSDC’s surveyed minority-owned businesses, only 12% received the funding. More than half of submitted applications did not receive any response.
“Administration of the initial round of PPP funding was riddled with countless loopholes and lacked accountability measures. It’s disappointing to see that the process was neither equitably nor objectively managed with too few minority-owned businesses securing PPP dollars thus far,” Trimble said in an email.
Trimble said although the Coronavirus Aid, Relief and Economic Security (CARES) Act is designed to support small businesses, the money has not been distributed equitably. The NMSDC is advocating on behalf of these businesses. Even the Los Angeles Lakers basketball team qualified and received millions from the first package. However, it returned the money upon the news of the funds being depleted. The franchise is worth $4.4 billion.
CNN obtained a copy of the text of the bill passed in the Senate and House last week. It outlines plans to authorize the SBA’s PPP to spend $310 billion to deliver aid to small businesses. Another $75 billion will go to hospitals and healthcare providers overwhelmed by the pandemic, and $25 billion will go toward COVID-19 testing.
Before the bill reached the House, it spent two weeks in the Senate as Republicans sought to pass a less comprehensive version of the legislation and Democrats sought to add other funding to it. This move comes in an unprecedented slew of attempts to protect the economy. A $2 trillion rescue package, a $192 billion relief measure and another $8.3 billion plan have also been passed. Democrats are also planning another rescue bill.
Republican opposition to the bill includes the argument that stimulus checks are not going to be effective in bolstering the economy.
Republican Sen. Rand Paul of Kentucky voiced opposition to the deal Tuesday, arguing that relief efforts have already cost more than $2 trillion, and that the economy can only be fixed through resumed commerce, not more bailout dollars.
Out of the $310 billion authorized for the PPP, $60 billion will go to smaller lending facilities, according to the bill, which defines these lenders as “community financial institutions, small insured depository institutions and credit unions with assets less than $10 billion.” However, many fear that this round of funding could run out just as quickly as the previous did.
Ten billion dollars will go to grants under the SBA’s Emergency Economic Injury Disaster Loan Program. Fifty billion will go toward disaster recovery loans and $2.1 billion will go to the SBA to cover salaries and other expenses.
Democratic Sen. Chuck Schumer of New York told CNN that the bill does not include more money allotted to states and localities — which Democrats have been pushing for. In the future, Democrats are expected to introduce another relief package that will cover states and localities.
As the government is working to keep small businesses afloat, many private banks are as well. Last month, Key Bank (No. 36 on DiversityInc’s 2019 Top Companies for Diversity), U.S. Bank (No. 46), TD Bank (No. 19) and Wells Fargo (No. 13) announced plans to help small business customers and communities. All of these companies have said their financial advisors are available to discuss issues with customers. U.S. Bank’s chief social responsibility officer Reba Dominski announced the bank would be donating $4 million to community organizations, including LISC, which will receive money to help small businesses with flexible loans and other solutions. Wells Fargo announced small businesses unable to pay their loans can request assistance and receive a 90-day payment suspension without penalty.
Related Story: U.S. Bank, KeyBank, TD Bank and Wells Fargo Announce Efforts to Mitigate Financial Impact of COVID-19
In addition to advocating for minority-owned businesses, Trimble said the NMSDC has launched new supply chain sourcing processes that directly connect its corporate members with minority businesses delivering products and services related to COVID-19. It has added virtual resources, programs and communications.
“We’re not only focusing on today’s environment, however. By bolstering MBE sustainability now, we can help them be better positioned to access and address future opportunities,” Trimble said.