Monday, June 01, 2020

Critics say small businesses, some small rural lenders, left out of Paycheck Protection Plan aid

Though Congress has provided more than $600 billion in forgivable loans for small businesses who retain their employees during the pandemic, critics say rural entrepreneurs are being left out.

"A May 8 report by the Small Business Administration’s inspector general found that the SBA failed to follow congressional direction to prioritize small businesses in underserved and rural markets in the original" Paycheck Protection Program, April Simpson reports for Stateline. "And because the SBA did not collect demographic data on those borrowers, the agency doesn’t know how much money went to rural, minority and women-owned businesses."

An online survey by the National Main Street Center found that fewer small rural businesses applied for or received PPP aid than their urban counterparts. "Of 631 respondents in 43 states, the vast majority employ fewer than 20 people," Simpson reports. "The survey found that in communities of fewer than 50,000 people, 76 percent of businesses applied, compared with 89% in places with larger populations. And 45% of small business applications in smaller areas were approved, compared with 59% in larger ones."

Critics say many rural business owners don't have the banking relationships necessary to take advantage of the PPP, Simpson reports. In May, Ines Polonius, CEO of Arkansas-based small-business lender Communities Unlimited told members of a House small business subcommittee that the PPP failed to help rural businesses as the "direct result of decades of bank disinvestment from rural communities across the country."

Responding to the criticism, the SBA and the Treasury Department announced last week "they would set aside $10 billion in funding for the Paycheck Protection Program to be lent exclusively to Community Development Financial Institutions, which lend to rural, minority and under-served groups," Simpson reports.

However, Vandell Hampton Jr., CEO of True Access Capital, said many small CDFIs like his can't participate in the PPP, Simpson reports: "Smaller lenders don’t have the capital to lend and wait to be reimbursed, nor do they have the capacity to quickly process loan applications, Hampton said. Instead, grant money to support smaller institutions, urban or rural, would have been more effective, he said."

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