WASHINGTON, D.C. – Today, the Small Business Administration announced that it exhausted its $350 billion funding capacity and is unable to accept new applications. Congress has not been able to agree on how to update the agency’s Paycheck Protection Plan (PPP), a provision of the CARES Act designed to provide forgivable loans to small businesses during the COVID-19 pandemic. Read the policy recommendations. (PDF)
Center for Responsible Lending (CRL) President Mike Calhoun made the following statement:
We urge lawmakers to agree on a deal that meets the several critical emergency needs requiring additional funding and to extend the PPP piece of the pending relief package in a way that is inclusive and equitable. This PPP program requires reform. To date, loans have too often gone to well-connected, wealthier companies leaving many Main Street small businesses and smaller lenders excluded. In particular, it has failed to provide benefits to the vast majority of businesses owned by people of color.
Black, Latino, Asian American and Pacific Islander, and Native owned businesses account for almost one third of all U.S. businesses. They contribute 7.2 million jobs and $1.38 trillion in revenue to the economy, and yet, mainstream banks and other existing SBA lenders are excluding them from their fair share. Banks are lending money to businesses with payrolls larger than many small businesses and most businesses of color. They are also prioritizing their existing customers, further shutting out most business owners of color and others who do not have these relationships. These actions raise serious concerns of equity; after all, these private lenders are distributing taxpayer funds. And the ‘first come, first served’ nature of the program is exacerbating these inequities.
The next stimulus bill must include targeted relief for lenders who better serve smaller businesses and businesses of color. Lawmakers need to support community development financial institutions (CDFIs) and minority depository institutions (MDIs) that serve borrowers of color. Also, at least 20 percent of new lending should serve businesses of color. To ensure equity and transparency, data must be reported on borrower demographics and loan amounts.
Communities of color have been hit hard by the COVID-19 crisis, experiencing higher levels of lives lost, illnesses, and job losses. They should not be excluded from one of the largest COVID-19 relief programs. The Great Recession drained communities of color of a trillion dollars of wealth that they have yet to recover. We cannot allow that to happen again.
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