Who Would Be The Best Small Business President?

It’s no secret the toll that COVID-19 has taken on small businesses. Many have shuttered forever while countless others try to hang on despite the restrictions put into place by the government to try to stop the spread of the disease.

One of Joe Biden’s main campaign issues has been how poorly, in his view, President Trump has handled the coronavirus pandemic. The former vice president’s campaign website says The Trump administration’s ongoing failure to manage the COVID-19 crisis and corrupt recovery that left behind small businesses has put the U.S. on the verge of an economic disaster. More than 1 in 6 small businesses now risk permanent closure, and many of those that manage to survive the pandemic may ultimately collapse under the weight of enormous pandemic-related debt.

Biden says more than 400,000 small businesses have closed and many that remain — and their 60 million employees — are now struggling to hang on. The former vice president wants to help the  75% of small businesses have been negatively impacted by the current crisis. Over half of small businesses say it will take more than six months to return to normal operations… if they ever fully recover.

Some of the statistics are disheartening: the number of active Black-, Latino-, Asian-, and woman-owned small businesses plummeted by 41%, 32%, 26%, and 25% respectively between February and April. An estimated 40% of Black-owned firms will have to lay off employees or cut wages if they do not receive assistance, and 43% will deplete their cash reserves by the end of the year.

Biden has offered proposals to set up “equitable small business support’ and outlined an ambitious “restart package” to help them reopen. Among his priorities are expanding access to capital for businesses owned by women, minorities, and veterans.

Among his proposals is to utilize the more than $100 billion in the PPP funding pool that has gone unused. Biden also believes that PPP must be revamped as part of a broader relief package to ensure small businesses that have experienced significant losses finally get the help they need. Specifically, he wants to overhaul the PPP to guarantee every qualifying small business with 50 or fewer employees gets relief. He especially wants minority-owned businesses to get relief quickly and easily. One way, he believes, is by issuing flexible grants, instead of loans, for “truly small businesses that have lost substantial revenue.”

Expand Access To Capital For New And Established Small Businesses

Biden aims to spur more than $50 billion in public-private venture capital to entrepreneurs in disadvantaged areas by funding successful state, local, tribal, and non-profit investment initiatives. He also encourages private equity investment in businesses in disadvantaged areas by expanding the New Markets Tax Credit to $5 billion yearly and making it permanent. Further, Biden wants to expand access to $100 billion in low-interest business loans by funding lending programs in disadvantaged areas.

Additionally, he wants to expand the role of Community Development Financial Institutions (CDFIs) by increasing their direct funding and expanding their capacity to offer loans to start-ups and established small businesses. He hopes to strengthen and expand the Community Reinvestment Act to ensure that our nation’s bank and non-bank financial services institutions are serving all communities.

Biden also says he is offering a “Build Back Better” recovery plan includes a $400 billion procurement effort designed to support small businesses and tackle inequities in the federal contracting system. Specifically, it would increase federal contracting opportunities for certified “small disadvantaged businesses” by expanding the SBA’s 8(a) business development program.

The former VP also wants to require prime contractors to increase subcontracting opportunities for small disadvantaged businesses and protect small businesses from federal and state contract bundling the often prevents companies owned by Black and brown people, from effectively bidding on procurement contracts. He also hopes to incentivize state and local governments and private sector partners to contract with small disadvantaged businesses.

Other priorities for Biden are to promote corporate mentorship programs between veteran-owned businesses and existing contractors to support veteran entrepreneurship and to ensure military spouses have the full opportunity to start and grow their own businesses by providing micro-grants, mentorship, and technical assistance through a military spouse entrepreneurship pilot program. He hopes also to create a national network of federally funded small business incubators and establish an intensive, semester-long business development program at every public community college, as well as two-year Historically Black Colleges and Universities. Biden also wants to give small businesses a tax break for starting a retirement plan and giving workers the chance to save at work.

President Trump, the Republican nominee, will focus on his experience in business and claims credit for what has already been done to help small businesses.

This week, Jovita Carranza, the SBA Administrator that Trump appointed, announced its Fiscal Year 2020 summary of its traditional lending program: loans guaranteed through traditional SBA lending programs exceeded $28 billion. The agency also reported on the aid provided via the CARES Act, which Congress approved and President Trump signed. The legislation dramatically increased the loan volume guaranteed by the agency.

In FY20, the CARES Act’s Paycheck Protection Program (PPP) – administered by the SBA and the Treasury Department — resulted in 5.2 million loans worth more than $525 billion. Further, the SBA’s Economic Injury Disaster Loan (EIDL) program added another 3.6 million small business loans valued at $191 billion, as well as an additional 5.7 million EIDL Advances worth $20 billion. 

“In response to the unprecedented challenges faced by small businesses this year, the Trump Administration provided more than three-quarters of a trillion dollars in financial assistance to support impacted small businesses. SBA lending data further reflects the extraordinary commitment this Administration has made to supporting entrepreneurs in underserved communities,” Carranza said.

Highlights from the PPP include:

  • 27% of the PPP loan dollars were made in low-and moderate-income communities which is in proportion to the percentage of the population in these areas.
  • More than $133 billion, or 25%, of PPP loans were approved for small businesses in historically underutilized business zones (HUBZones); and,
  • Over $80 billion, or 15%, of total PPP dollars were approved to small businesses in rural communities.  

Carranza further noted that in addition to the tremendous amount of aid provided by the CARES Act via the PPP and EIDL loan programs, the SBA’s regular loan programs showed a solid year-over-year improvement, especially in the 504 and Microloan programs.

The SBA built upon last year’s lending numbers for traditional loans while overseeing the largest and most consequential disaster response effort in modern history. In FY20, SBA’s flagship 7(a) loan program made approximately 42,000 7(a) loans totaling $22.55 billion. The 504 loan program grew 17.5% with more than 7,000 loans made for a total dollar amount of more than $5.8 billion. The Microloan program, which specifically helps businesses in underserved communities, saw a 4.3% increase in small business lending and achieved a second straight record year performance. Nearly $85 million went to over 5,800 small businesses. Notably, 34% of microloans made in FY20 went to Black-owned small businesses. These loans create jobs and grow small businesses in communities all across the country.

Specifically looking at minority businesses, the SBA processed $7.5 billion in combined 7(a) and 504 lending, or 27% of the SBA’s loan portfolio. Additionally, the SBA’s 7(a) lending to women-owned businesses was nearly $2.7 billion in FY20, while lending from the 504 loan program to women-owned businesses was over $522 million. Loans to veterans totaled nearly $835 million for the 7(a) and 504 programs.

It has also been a historic 12 months for the SBA’s disaster program, which approved and disbursed more than three times as many funds for the COVID-19 EIDL program ($211 billion) as the agency had done for all disasters combined in the SBA’s 67-year history ($67 billion), according to Associate Administrator for SBA’s Office of Disaster Assistance James Rivera. 

Small business owners whose companies have been harmed by the coronavirus pandemic should consider what has been done, what could have been done better, and what Biden and Trump are saying will be done if they are elected. One thing we can say is that the outcome of the election this year will have a massive and immediate impact on business owners, no matter which way the White House goes.

I remind many of the business owners that I speak to that it’s not only the presidential election that matters. The composition of the House of Representatives and the Senate will likely have the most impact on stimulus negotiations after the election. The members of each political party will have different positions on topics including tax credits for PPE and blanket forgiveness for PPP loans. While the President will have the bully pulpit, we know that Congress will be instrumental in either helping business owners quickly or continuing to delay relief.