The PPP won’t deliver the support small businesses need

It’s clear from stories across the country that the Paycheck Protection Program (PPP) is not reaching the scale, speed or equity of access necessary to prevent a wave of small business closures and job losses. Desperate small businesses, confused lenders and crashed websites are not just the growing pains of a new program. This botched roll-out reveals the underlying problems in its design. 

There are reports that the Senate could move as early as Thursday to approve approximately a quarter trillion dollars in new relief to small businesses through the new PPP. This new cash infusion will not solve the other problems with the program. The PPP must be seen as an intermediate approach as we build a more comprehensive strategy to support small businesses and incentivize them to maintain their payroll or rehire laid off workers.  

Small Businesses need money immediately or many are going to permanently close their doors. There is a land rush feeling to access this money. Main street businesses say they need more assistance, more recovery time and less risk. For the PPP, members across our network are saying that the timelines are too short and the variety of expenses it can cover is too limited. What’s more, the entire process is incredibly confusing. In a recent survey of Main Street Alliance members, an overwhelming 76 percent said subsidies – not loans – would help them survive the pandemic.

The PPP is also not designed to reach vulnerable businesses in neighborhoods without banks or SBA offices. Banks have already begun limiting who is eligible to apply for the loans.

Entire sectors of the small business economy are facing an existential crisis, and tens of millions of jobs are at stake. We’ve already topped 15 million unemployed in three weeks.

Congress has taken important steps in the COVID-19 relief packages. But the programs are not workable for many small businesses, are massively underfunded and will not reach many businesses in need. Now is not the time for incremental changes and fixes. 

A new approach is needed. It would be much smarter, and save many more small businesses and jobs, to take those needed additional funds and put them towards direct payroll subsidies for small businesses, bypassing the hobbled lending system that is causing mass confusion and delays. Here are some things small businesses and workers need:

• Direct subsidies – not loans – for all employers with 500 or fewer employees to retain or bring back their workers at full wages and benefits and cover fixed costs, including rent, mortgages, utilities and insurance payments.
• A rapid, streamlined process designed to provide subsidies for all impacted employers and independent contractors with minimal barriers to entry and no confusion or uncertainty.
• Subsidies delivered through the U.S. Treasury, with resources directed to multiple agencies, including state and local governments, to ensure effective and universal take-up, especially among communities of color and other disadvantaged groups.
• Subsidies converted to loans if misused. Businesses should be required to maintain employment and wage levels and provide access to emergency paid sick time and leave as a condition for receipt of assistance, monitored through payroll tax receipts.
• Rapid data collection on all COVID-19 relief small business programs regarding uptake and impact to target additional outreach and resources to failing sectors.
• Safeguards against excess fees and predatory small business lending, including an APR cap for small business loans, a ban on confessions of judgement, limits on small business debt collection and a moratorium on commercial evictions.

Federal action is needed to preserve our small business economy. Without it, main street businesses will suffer massive losses, and Wall Street and private equity will come in to consolidate and monopolize the rest. To protect main street jobs, workers and businesses while they must shut down and adapt, small businesses need direct subsidies to retain or bring back their workers at full wages and benefits and cover fixed costs (such as rent, mortgages, utilities, insurance payments, etc.). They need a streamlined process to get money now.

There is precedent for this. Successful programs like this have been adopted in Germany, Britain, Ireland and Denmark. Continued reliance on small business loans, particularly this botched PPP roll out, is going to contribute to even more eye-popping mass employment.  

Congress and the Treasury must create a policy response that is on par with the severity, scope and potential duration of the financial crisis that small businesses and their employees are facing as the coronavirus continues to spread. The current small business relief programs are too complex and underfunded; what’s more, they are not delivering urgently needed aid fast enough. The PPP should be seen as a bridge to a larger and more comprehensive program to support impacted small businesses and their employees. We have a chance to do this right, let’s not double down on the wrong program.

Amanda Ballantyne is the executive director of the Main Street Alliance, a national network of 30,000 small business owners.