Many of the supposedly “small businesses” that have received federal loans to help them survive the Covid-19 pandemic haven’t been all that small, and loan approvals tended to favor white-owned companies.
On Monday, President Biden introduced a plan to rectify such imbalances.
His administration will give the smallest businesses two weeks of exclusive access to Paycheck Protection Program (PPP) loans, starting on Wednesday.
During that time, says Business Insider, “the Small Business Administration will only accept applications for forgivable … PPP loans from firms with fewer than 20 employees, to ensure that they are not crowded out by larger firms.” That 20-worker limit would include the overwhelming majority of genuinely small companies.
It will also include sole-proprietor companies with no employees at all, along with independent contractors and self-employed individuals, reports ABC News, noting that 70% of such businesses are owned by women and people of color.
Such no-payroll businesses “previously were excluded altogether or received as little as $1 because the loan amounts were calculated based on the number of employees,” says CNN.
More money would also go to small farmers and ranchers.
Among the well-known companies that received checks during the first round of the PPP last year were Shake Shack, Ruth’s Chris Steakhouse, the Los Angeles Lakers and some high-income professions, like law firms. (Some of that money was returned later.)
In addition, minority-owned businesses, particularly those in mostly Black neighborhoods, got far fewer loans than those in white-majority areas.
“Officials say the moves are part of the Biden administration’s effort to make equity a priority in its response to the coronavirus pandemic, which has caused more than 400,000 small businesses to close and resulted in millions of job losses,” says The Hill.
“The president knows how essential small businesses are to cities and towns across the country and how important the millions of jobs they provide are to American families who are already struggling to make ends meet,” a senior administration official told reporters.
“While the Paycheck Protection Program has delivered urgent relief to many businesses across the country, the initial round of PPP last year left too many minority-owned and mom-and pop-businesses out while larger and well-connected businesses got funds quickly,” the official added.
Businesses can apply for a PPP loan through until March 31. The administration is not asking Congress to extend the program beyond that, but Biden officials have indicated they wouldn’t oppose such an extension.
Biden’s announcement came as House lawmakers prepared to vote on his mammoth American Rescue Plan, a $1.9 trillion coronavirus relief proposal. That vote could come later this week.