Washington, DC — Below, please find a USA Today op-ed from Accountable.US President Kyle Herrig and former Small Business Administration (SBA) Deputy Administrator Marie Johns on how Trump’s Paycheck Protection Program (PPP) has failed minority-owned small businesses and what Congress can do to fix the broken program.
Our government’s systematic failure to support small businesses did not happen by accident. If we fail to change course, businesses may never recover.
By Marie Johns and Kyle Herrig, July 7, 2020
In recent months, hundreds of thousands of small businesses have turned off their lights, potentially never to reopen. A disproportionate number of those businesses were owned by people of color in underserved communities.
Our government’s systematic failure to support small businesses did not happen by accident. If we fail to change course, our small businesses may never recover.
Taxpayers pumped roughly $600 billion into businesses through the Small Business Administration’s Paycheck Protection Program. The Trump administration had the resources to help our most vulnerable small businesses, but the program was poorly designed and hastily administered.
Congress has now extended this broken program instead of fixing it. We cannot do the same thing over and over again and expect a different result.
Under the current program, publicly traded companies and other mid- to large-sized businesses were able to cut in line and access money intended for actual small businesses. Too many small businesses were shut out of the process — particularly those owned by African Americans, Latinx, women and other minority groups.
According to a report by the Center for Responsible Lending, roughly 95% of Black-owned businesses, 91% of Latino-owned businesses and 75% of Asian-owned businesses stood “close to no chance of receiving a PPP loan through a mainstream bank or credit union” because of how poorly the program was structured. It wasn’t just an accident that the Trump administration overlooked business owned by people of color — it excluded almost all of them by design.
Many Black-owned businesses that did meet the Trump administration’s arbitrary application requirements were still shut out. The law had instructed SBA to prioritize business owners in “underserved” communities, but an inspector general report found that lenders were not made aware of those requirements and “that businesses owned by people of color may not have received loans as intended.”
Black-owned businesses in peril
As a result of this program’s failures, an estimated 40% of Black-owned small businesses may never reopen.
While it may be too late for businesses that have already gone under, it’s not too late to change course. SBA has the institutional knowledge to design and execute a program that will save small businesses, create an environment where entrepreneurs thrive, and be responsible stewards of taxpayers’ money.
The Trump administration fought for months to keep basic details on PPP loan recipients secret. When the data was finally disclosed it revealed evidence of the PPP’s rampant mismanagement: this program intended to help small businesses has benefited large companies, special interests, and shockingly, states that were largely unharmed by the crisis when the aid was approved.
Not only was this program poorly administered, it was rife with waste, fraud and abuse.
Flexibility key to meeting needs
A new program must be flexible to meet the needs of the small businesses in need of a government lifeline, especially Black and other minority-owned businesses. For example a barbershop with an owner-operator may not qualify for a one-size-fits-all payroll grant or loan, but a small grant of a few hundred dollars for rent may mean the difference between surviving and going out of business.
During the Obama administration, SBA launched the Council on Underserved Communities to help “populations that traditionally have faced barriers in accessing credit, capital and the other tools they need.” The Trump administration has cast aside the council.
It’s no surprise that a government that is less diverse and inclusive is incapable of meeting the needs of underserved communities. Government has a mandate to engage and learn to be responsive to serve the needs of taxpayers.
Congress should not extend a broken program in perpetuity. Instead, they should develop a small business program that is transparent, data-driven and aligned with the needs of underserved communities.