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Published in Small Business

SBA officials discuss ‘growing pains,’ inequities with PPP loans

BY Thursday, September 03, 2020 04:10pm

GRANDVILLE — U.S. Small Business Administration officials visiting Michigan this week say the federal agency has undergone a major transformation during the COVID-19 pandemic while recognizing inequities in a key relief program for small businesses.

SBA Great Lakes Regional Administrator Robert Scott and Michigan District Director Constance Logan met with lenders from multiple banks in Grandville on Wednesday for a roundtable discussion on the agency’s pandemic-related lending programs for small businesses.

Left: Constance Logan, right: Robert Scott COURTESY PHOTOS

The Paycheck Protection Program, authorized under the $2.2 trillion CARES Act, provided small businesses with loans that could be forgiven under various conditions. In total the PPP has issued more than $525 billion in pandemic relief to more than 5.2 million U.S. small businesses.

Scott said the SBA quickly grew from 1,800 lenders that could issue loans to 5,500, causing “growing pains” and transforming the agency.

“The U.S. Small Business Administration has changed forever,” Scott said. “We used to be this small organization that not too many people knew about and now we’re like the stars of the show and we have growing pains when it comes to that. Going forward, we’ll have a pivotal role in what our country looks like in the future and how many businesses actually survive.”

Though the program has helped millions of businesses across the U.S. during widespread shutdowns, companies are still struggling financially from the pandemic or have been forced to close, Scott said, suggesting an ongoing need to issue more funding.

President Trump signed the $2.2 trillion CARES Act on March 27, and PPP loans were first issued six days later. The first $349 billion in PPP loans were issued within two weeks, though more than $130 billion from the second tranche remains unspent. 

Applications closed for the program on Aug. 8 after $16 billion had been issued to more than 128,000 Michigan businesses.

Some companies have still been unable to access remaining PPP funding, but overall the program did its job, Scott said.

“Were there some businesses that were left out? Absolutely,” Scott said. “It wasn’t optimal, but hopefully they can come back and apply.”

Equity in relief 

Minority small business owners in West Michigan and elsewhere have criticized apparent inequities in the PPP program since its inception, including limited access based on their historical lack of access to capital. 

Of the 785 Michigan restaurants that were approved for more than $150,000 each in PPP loans, only one self-identified as being Black-owned, the Detroit Free Press reported last month. However, answering demographic-related questions during the loan process was optional.

“Many minority owned businesses do not have a strong financial relationship with a lender, so there was some struggle with that,” Scott said. “The district office here partnered with a lot of organizations to get the word out.”

The SBA couldn’t confirm whether minority small business owners received less of their share of PPP funding because of a lack of data collected in the application process, Scott told MiBiz.

“We’re not able to get data on the front end,” Scott said. “On the back end the borrower can optionally fill out a form to give us demographics so we know a little more about demographics in the PPP program, but the data is not exactly accurate because it’s optional to fill out.”

While Logan said the process could have been improved, the SBA has reached out to chambers of commerce representing minority owned businesses as well as Michigan’s only Black-owned bank, Detroit-based First Independence Bank.

“We continue being very intentional about outreach, our messaging and seeing what the barriers are, and doing what we can to remove them,” Logan said.

Language barriers and confusion over which businesses could apply was among the feedback the SBA has received, Scott said.

“We can always do better and that’s our goal coming out of this,” Scott said. “This pandemic and economic recovery is not going to be an overnight thing. It’s going to take us years.”

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