Major gaps on PPP rules still unresolved as 2nd round of funding goes out

Design flaws in the program still need to be resolved

As the second round of Paycheck Protection Program Funding starts up today, Main Street Alliance Executive Director Amanda Ballantyne had this to say:

“It is reckless for the Small Business Administration and Treasury Department to release a second round of funding before clarifying the major gaps and issues with the Paycheck Protection Program. The program still lacks clear terms for forgiveness, rules prohibiting banks from again prioritizing applications of larger clients, and guidance for new lenders to come online to the program.  The dangerous inequities we saw with the first round will not be resolved. Minority-, immigrant- and women-owned businesses are still being left out. With funding likely to run out in 48 hours, it is ludicrous that Congress thinks it has done its job supporting small businesses.

At minimum the regulations with the current program need to be clarified, and there continue to be major structural issues with the PPP program. The program needs to be adjusted to meet a longer recovery horizon and the percent of the loan eligible for non-payroll expenses as well as the list of eligible expenses must be expanded, including allowing use for capital costs as owners adapt businesses in recovery. The PPP and EIDL need stringent monitoring to ensure equity in loan distribution by all lending institutions. While this second round dedicated funding to smaller community banks and lending institutions, there is no stipulation for where these lending institutions must direct their funds and no clear set-aside of funds for CDFIs.  However, what small businesses really need are direct subsidies, not more loans.

This package should be a bridge to a more comprehensive program that addresses what will be an ongoing economic crisis until there is a vaccine. Calls to open the economy are premature, threaten public health, and will only contribute to more pain in the long run. Small businesses need direct support to weather this storm, especially beyond the eight-week timeline of the PPP loan.

We must now turn our attention from triage to programs that will put small businesses on a path to economic recovery.”

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