America's Small Businesses Are Getting Hammered

Todd Lindsey, is Cofounder & COO of A10 Capital, an SBA-approved PPP Lender.
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Extend and Target PPP to Achieve the Mission of Supporting All of America’s Small Businesses

Congress created the Paycheck Protection Program to help small businesses, their employees and communities survive the COVID-19 pandemic. In many ways PPP has succeeded, especially for the largest small businesses. But PPP has failed our smallest small businesses, including minority-, women- and veteran-owned businesses.

To ensure that PPP helps the smallest businesses Congress should refine and extend the program so continuing assistance flows only to businesses that have been left out.

● Cap loans at $50,000
● Limit borrowers to companies with fewer than 10 employees
● Replenish the fund with $75 billion and extend PPP for six months (November 30)

This simple, inexpensive extension would help millions of sole proprietors and microbusinesses – especially rural, minority-, women- and veteran-owned businesses that were effectively excluded from the first ten months of PPP (April 2020 – February 2021).

Until February 2021 PPP Favored the Largest Small Businesses. Due to the original rules about borrower criteria and lender fees, the largest small businesses (like chain restaurants, hotels, law and accounting firms) with pre-existing banking relationships got huge loans that were the most profitable to lenders. To help smaller businesses, in December 2020 SBA increased fees for loans under $50,000, but simultaneously authorized second loans to previous (larger) borrowers, which remained more profitable to lenders so still the smallest businesses were ignored.

The smallest businesses did not break through until February 2021, when SBA mandated a 14-day exclusive borrowing period for businesses with fewer than 20 employees. Suddenly there was a huge new wave of applicants seeking funds and PPP was popular again - not because the need for funds was new but because the door was now open for a very large class of smaller, less sophisticated borrowers. Now that door has been shut because PPP is running out of money. The extended new applicant deadline was May 31, but SBA thinks funding will not last past applicants submitted as of May 4.

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