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Comment to the Small Business Administration: The Paycheck Protection Program Continues To Be Disadvantageous to Smaller Businesses, Especially Businesses Owned by People of Color and the Self-Employed

May 15, 2020
Consumer Finance
Comment Letter

CRL's comment to the Small Business Administration on the April 15 Interim Final Rule implementing the Paycheck Protection Program focuses on two key challenges with the PPP to date:

  • The Paycheck Protection Program continues to be disadvantageous to smaller businesses, and businesses without employees. PPP loans can be forgiven if the business is able to use the funds for eligible expenses within eight weeks of receiving the loan. This requirement makes it challenging, particularly for very small businesses, to ensure loans are forgiven rather than converted into long-term debt. The PPP fee structure also heavily incentivizes loans to larger firms that can garner higher fees. By distributing PPP funds through existing eligible SBA approved lenders, banks, and credit unions, the program ensures that disadvantaged businesses, including those owned by people of color are likely to face barriers in accessing critical PPP loans. Long delays in the distribution of funding and the prioritization of larger firms mean that small businesses and businesses owned by people of color had to wait to receive critical PPP loans to retain their employees and stabilize their businesses.
  • Small businesses owned by people economically and socially marginalized were hardest hit by the structural limitations built into the PPP. Businesses owned by people of color are likely to have fewer employees and less revenue than white-owned businesses. As a result, they were less likely to qualify for larger loans that would yield the higher fees that would make them a priority for lenders at the outset of the program. Small businesses owned by people of color are even more likely to have no employees, putting them at an even greater disadvantage to larger businesses that could garner higher fees. Further, the program out-right excludes criminal legal system-involved business owners, including people who have been charged, but not tried or convicted of a crime.

The comment concludes with recommendations to the Small Business Administration to improve the program so that small businesses owned by socially and economically marginalized individuals are adequately served going forward.