Monitoring the cash: Bid to make enterprise rescue extra inclusive undercut by lack of information

“The data gap for PPP loans has been a persistent problem since Congress launched the program almost a year ago,” said House Small Business Chair Nydia Velázquez (DN.Y.) said POLITICO. “The lack of demographics hampers our ability to ensure that money reaches underserved businesses that were originally excluded from the program.”

The lack of data on PPP borrowers is one of the biggest challenges for the administration in reviewing the program. This is extremely popular as the loans can be granted if employers keep payroll but are affected by complaints of unequal access, opaque rules, and fraud. Assuming the PPP hasn’t reached enough underserved businesses, Biden is revising the program to expand access and target the smallest employers. Congress also provided funding for the smallest businesses and PPP lenders targeting low-income and low-income communities.

A bicycle is parked in front of the Artisan Bar and Cafe on St. Claude Avenue in New Orleans. | Dorthy Ray / AP Photo

The SBA lacks the power to compel PPP borrowers to disclose demographic information. Agency officials point to the December Economic Facilitation Act, which requires borrowers to report demographic information at their own discretion, as well as fair lending rules designed to deter banks from discriminating against customers. Private lenders are responsible for distributing the loans.

The Trump administration only began voluntarily starting PPP applicants to volunteer demographic information when the program restarted this year. The Biden administration made the questions a more important part of the application process. But most companies still don’t reveal the details even when asked. One challenge cited by lenders is that borrowers fear discrimination in providing the data.

About 75 percent of PPP recipients this year did not indicate their ethnicity, and 58 percent did not indicate their gender, according to SBA data. 65 percent didn’t say they were veterans.

The SBA’s inspector general, who first raised concerns last May, said in a January report that the agency’s efforts to reach underserved markets “may never be fully known” without full data.

“We need more information about these loans so that we can assess the effectiveness of the programs and know where we can better use future relief,” said the chairman of the Senate for banks Sherrod Brown (D-Ohio). “We need to make sure these programs work for all businesses, including minority and women-owned businesses.”

The data is important in holding government and lenders accountable for the success of a program that has provided more than 7 million government-sponsored loans through private banks. The information is also vital as officials seek to recalibrate the PPP to reach more Americans before it expires in late March.

When the Trump administration rushed to launch the PPP last year, the SBA was criticized for not doing enough to ensure that the smallest businesses had access to the program. Those concerns were fueled by news that big companies like Shake Shack and Ruths Chris were among the first to get credit. Concerns grew after the program’s initial funding ran out in less than two weeks before Congress replenished it.

Access fears were just one of a series of controversies surrounding the program that the SBA and Treasury Department embarked on to save a free-fall economy that hurt minorities the most.

A Federal Reserve poll published in February found that 79 percent of Asian-owned small businesses and 77 percent of black-owned small businesses described their financial situation as “fair” or “bad,” compared with 57 percent of companies as a whole. A survey published by Facebook and the Small Business Roundtable found that the closure rate for small businesses in majority and minority neighborhoods was 36 percent, compared with 22 percent for businesses in non-minority neighborhoods.

“Much damage was done to equitable access at the beginning of the program,” said Michael Roth, who joined the SBA as a senior advisor in January, in an interview. owned business today than you had in March [2020]. We have to make sure that as we continue to build programs in the future, we will center our equity in them. “

Although the iteration of the PPP continued through early August last year, the Trump administration didn’t include a demographic questionnaire on loan applications until it restarted in January at more than $ 284 billion. In May, optional demographic questions were added to the application that businesses must complete in order to issue the loan after they have spent the funds.

“If you’re being generous, you may just not have thought about it,” said Jeannine Jacokes, executive director of the Community Development Bankers Association, which represents lenders who focus on low-income communities. “Or you could say that maybe they didn’t care if it was just about getting the money out quickly.”

Biden administrators, who came to power with a promise to eradicate inequalities in the economy, say they are trying to improve the SBA’s data collection and analysis for PPP loans while targeting the program at underserved businesses. One administration official described the data challenges earlier this year as “dire”.

According to New York University’s assistant professor of finance, only 726,000 of data available as of Feb.7 on just over 6 million loans have reported races Sabrina Howellwho researches how minority companies fared about different types of PPP lenders. She and other researchers working on the project used borrower names to predict the race of business owners.

In the past few days, the SBA has put demographic questions on the first page of the PPP loan application, among other things. In addition, the agency has started publishing more detailed analysis of where the money is going. in the new weekly reportsThe agency recognizes that demographics are limited. The reports provide metrics on the money flowing into low-income, low-income neighborhoods and rural areas for a bigger picture.

According to SBA dates through February 25th92 percent of PPP loans that year went to companies with 20 or fewer employees. Almost 25 percent of approved PPP funds went to low-income and low-income areas and 17 percent to rural areas.

The administration says the proportion of funding going to companies with fewer than 10 employees in the first month of the PPP’s relaunch this year is up 60 percent from the first month of the program last year. The average loan size – one of the administration’s measures of success – fell by 42 percent over the same period. However, the SBA says that the share of aid goes to low and middle income areas has remained “stagnant” compared to the first round of the PPP.

“If you look at the last round and time series, it almost looks like the largest corporations and businesses in high-income neighborhoods got money first, and smaller businesses and businesses in low-income neighborhoods got money last.” said Roth from the SBA. “So we’re trying to reverse that. The only way to reverse these things is to understand the metrics behind them and achieve real goals.”

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