This week, President Biden unveiled a new set of initiatives aimed at enhancing the latest round of the Paycheck Protection Program.
Among the initiatives, there’s a two-week period where only businesses with fewer than 20 employees will be able to apply for the forgivable loans — ostensibly giving them priority for the funds ahead of larger firms. There’s also modified rules to make a to-be-determined increase to the borrowing capacity allowed for sole proprietors, independent contractors and self-employed individuals and a set-aside of $1 billion for companies without employees that are located in low-to-moderate income areas.
“While these efforts are no substitute for passage of the American Rescue Plan (the president’s currently proposed $1.9 trillion rescue bill working its way through Congress), they will extend much-needed resources to help small businesses survive, reopen, and rebuild,” the White House said in an announcement.
Most small business advocacy groups (which themselves feed off government money and other “donations”) are falling over themselves praising the president’s announcement and calling for even more money. Even the president’s political opponents are muted in their response. That’s because it’s politically unwise to advocate against small businesses in this country. They’re the backbone of the economy. They represent the fighting, independent American way and blah, blah, blah.
But the president, with good intentions, is begging small businesses to take the government’s money. Why? Because the great majority of small businesses in this country don’t need the money. And that’s a problem for his administration.
Of course, there are plenty businesses that are hurting, and we know which they are: restaurants, retailers, fitness centers, etc. etc. Those people still need assistance (and I’m sure I’ll be hearing from them after this is published). But the rest aren’t doing nearly as bad as the administration would like the world to believe. Just look at the data.
The most recent index of small business optimism reported by the National Federation of Independent Businesses declined from prior months, but still remains at strong levels. A recent study from JP Morgan Chase found that 63 percent of small businesses are optimistic about their 2021 performance, and another study just released by financial services firm Guidant Financial found that only 4 percent of American small business owners expected to fail due to COVID-19. Bankruptcies fell by almost 30 percent in 2020, while startups rose more than 20 percent.
The economy – buoyed by historically high levels of household wealth, savings as well as strong retail sales, industrial production and construction activity is, according to the Wall Street Journal, “poised to surge once the vaccines and infection rates provide enough herd immunity” and that “at some point in 2021 the economy should stage a mini-boom.”
If you’re still not convinced then consider this: With only five weeks to go until the Paycheck Protection Program expires, there remains $244 billion of the $284 billion allocated to distribute. Not only that, but the last round of PPP closed with $130 billion still not taken.
Is this because “minority” businesses aren’t getting enough money? I don’t buy that entirely. Of course there are some that could use help.
But let’s please stop insulting them. These are not dumb people. They’ve been aware of these programs since their inception almost a year ago. Maybe these independent business owners – like many others – have other resources. Or they don’t want to get government loans or handouts. Maybe we should come to the realization that these business owners know what’s best for their own businesses. Why else would half of Black small business owners think they’ll bring in more revenue this year, and a quarter say they plan on hiring, according to this survey from Bank of America?
You can say that the loans aren’t getting out fast enough because of fraud checks at the Small Business Administration (SBA). But that’s tough to quantify, and I’d find it hard to believe that whatever is being done to make sure funds don’t go to the wrong people would significantly hinder the approval of applications and outflow of cash.
The fact is that there’s plenty of money already out there for small businesses that need it. Besides all that unused PPP (which has special targeted funds for restaurants, retailers and other businesses that have experienced substantial revenue declines), there’s the Economic Injury Disaster Loan Program and the Shuttered Venue Operators Grant with billions available. There’s local and state grant and loan programs — like this $2 billion proposed fund in California for restaurants. There are tax incentives like the Employer Retention and Work Opportunity tax credits. There are new principal and interest forgivable opportunities for SBA 7(a) and 504 loans. There’s unemployment compensation for the self-employed and freelancers.
So why is the Biden administration begging small businesses to take the government’s money? It’s because saying that there’s already plenty of resources available and that small businesses are doing better than most people think would call into question the need for an enormous $1.9 trillion stimulus bill.
That would mean cutting back on all the funding included in the bill that has little to do with small businesses and the pandemic, such as the $350 billion for mismanaged states and cities, the $86 billion to rescue multi-employer pension plans that benefit teacher and other unions, the $129 billion for elementary and secondary schools whether they reopen for classroom learning or not and the $40 billion for higher education as if universities and colleges need more money.
The great majority of small businesses don’t need more assistance or government programs. They need more customers. The best thing the Biden administration can do for them is to take all of those unused billions and put it towards vaccinations, health care and other programs that will get things back to normal. Or…gasp…not spend it at all?
Gene Marks is founder of The Marks Group, a small-business consulting firm. He frequently appears on CNBC, Fox Business and MSNBC.