•A bipartisan proposal by Sens. Steve Daines and Cory
Booker would make $50 billion in grants available for the smallest businesses and nonprofits.
Lawmakers negotiating the next small-business rescue package are facing mounting pressure to direct more aid to minority employers who are hurting the most during the pandemic but have struggled to access hundreds of billions of federal dollars unleashed since March.
Business groups and consumer advocates are lobbying Congress to rethink a model that has leaned heavily on distributing funds via private lenders because of concerns that the smallest businesses lack relationships with traditional banks.
A bipartisan proposal by Sens. Steve Daines (R-Mont.) and Cory Booker (D-N.J.) — backed by the U.S. Chamber of Commerce — would make $50 billion in grants available to state and local governments for the smallest businesses and nonprofits.
And Senate Small Business Chair Marco Rubio (R-Fla.) is floating new ways to aim funds at the hardest-hit businesses. The expected revamp of the Paycheck Protection Program — the $670 billion effort Congress created to rush forgivable loans to millions of small businesses — is likely to still rely on banks. But Rubio has circulated plans to target long-term loans at businesses that make most of their money in low-income communities and to set aside $25 billion for those with 10 or fewer employees.
“It’s not as simple as just keeping the lights on for the PPP forever,” said Thomas Sullivan, vice president of small business policy at the Chamber of Commerce. “There really does need to be an emphasis toward the underbanked.”
One widely cited economic analysis showed that Black-owned businesses were slammed the most by Covid-19, with the number of owners plunging by 41% from February to April. Research by the JPMorgan Chase Institute showed cash balances for Black businesses were down by 26% at the end of March from a year earlier, compared with a 12% decline for all firms.
Left unaddressed, the ripple effects of a wave of closures would be significant. Black-owned businesses are more likely to hire Black workers, offering a crucial source of jobs for a population whose unemployment rate has historically been roughly double that of White Americans, even in a strong economy.
They are also more likely to be located in majority-Black communities, helping boost property values for homes and businesses there. A disproportionate loss of Black-owned businesses could also widen the already staggering racial wealth gap in the country, where the average White family has 10 times greater net worth than the average Black family.
Advocates argue that the Paycheck Protection Program failed to fully address the problem, in part because it was structured to favor borrowers who have ongoing ties to banks, which businesses owned by people of color are less likely to have.
“We got off to a bad start for the underserved communities,” said Sen. Ben Cardin of Maryland, the top Democrat on the Senate Small Business Committee.
Montee Holland, president and CEO of a high-fashion dress suit brand called the Tayion Collection, said he was initially rejected for a PPP loan and then struggled to get approved for another.
The Michigan-based designer said he has managed to pay his rent and bills by selling the suits he had in stock directly to consumers online. But without assistance or a major change in the retail landscape, he expects to be able to last only six to eight more months.
“To say that it’s been tough is the understatement of the century,” he said.
One idea floated by consumer advocates is guaranteeing that lenders receive a minimum origination fee when they make the smallest loans.
“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.”
Rep. Dan Kildee (D-Mich.), who is sponsoring the legislation that would create a $50 billion grant program for businesses and nonprofits with up to 20 or 50 employees, said the smallest businesses were at high risk of not getting help under the PPP model.
“These are really small businesses for which the machinations of going through loan underwriting and then loan forgiveness are just completely unnecessary,” he said of his legislation with Daines and Booker. “Very often these are women, minority-owned or veteran-owned businesses.”
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