Paycheque Protection Program: Program changes increased lending to smaller businesses and underserved places

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What GAO found

The Paycheck Protection Program (PPP) supports small businesses through forgivable payroll loans and other eligible costs. Early loans favored large rural businesses, according to GAO’s analysis of Small Business Administration (SBA) data. Specifically, 42% of Phase 1 loans (approved April 3-16, 2020) went to larger companies (10 to 499 employees), although these companies represent only 4% of all small businesses in the United States. Similarly, rural businesses received 19 percent of Phase 1 loans, but accounted for 13 percent of all small businesses. Banks have granted the vast majority of Phase 1 loans.

In response to concerns that some underserved businesses, particularly businesses owned by the self-employed, minorities, women and veterans, were facing difficulties in obtaining loans, Congress and the SBA brought in a series changes that have increased lending to these companies. For example,

  • The SBA admitted around 600 new lenders to start lending during phase 2 (which ran from April 27 to August 8, 2020), including non-bank institutions (usually lending institutions that do not accept deposits).
  • The SBA has developed guidelines after Phase 1 to help self-employed people participate in the program.
  • SBA targeted funding for minority-owned businesses in part through community development finance institutions in Phases 2 to 3. (Phase 3 ran from January 12 to June 30, 2021.)

At the close of the PPP in June 2021, loans in traditionally underserved counties were proportional to their representation in the overall small business community (see figure). While loans to businesses with less than 10 employees remained disproportionately low, they increased significantly over the course of the program.

Paycheck Protection Program Loans, by Business Type or County

Why GAO did this study

The COVID-19 pandemic has caused significant turmoil in the U.S. economy, resulting in temporary and permanent business closures and high unemployment. In response, in March 2020, Congress established a PPP under the CARES Act and ultimately granted a commitment authorization of approximately $ 814 billion for the three-phase program. When the initial funding for the program ran out in 14 days, concerns quickly surfaced that some companies were not able to access the program, leading to a series of changes from the government side. Congress and the SBA.

The CARES Act includes a provision allowing GAO to monitor the federal government’s efforts to respond to the COVID-19 pandemic. The GAO published a series of reports on this program and made a number of recommendations to improve the performance and integrity of the program. This report describes trends in the participation of small businesses and lenders in P3s.

GAO analyzed SBA loan-level PPP data and county-level data from four US Census Bureau products and interviewed a generalizable sample of PPP lenders, stratified by lender type and size. GAO also reviewed legislation, interim final rules, agency guidelines and relevant literature, as well as interviews with SBA officials.

For more information, contact John Pendleton at (202) 512-8678 or [email protected]


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