Treasury Secretary Steven Mnuchin said on Wednesday with confidence that he believed another economic relief plan would be needed to help lift the US economy out of a recession in the wake of related to coronavirus stops.

“I really think we’re going to need another bipartisan piece of legislation to put more money into the economy,” Mnuchin said during a Senate Small Business Committee watch hearing.

But as lawmakers and Trump administration officials discuss the additional measures needed to mitigate economic disruption, billions of dollars previously allocated to help small business owners remain available through the cornerstone program of the effort. economic stimulus, the Paycheck Protection Program. Demand for funds has slowed down considerably.

And even with readily available financing, some businesses, especially minority and women-owned businesses, face persistent difficulties in obtaining it.

“90% of minority and women owned businesses, small businesses, have not had access to P3, ”Sen. Kamala Harris, D. Calif., ABC News chief anchor George Stephanopoulous said on“ Good Morning America ”on Tuesday.

While many businesses are still closed or are operating with reduced capacity, why don’t owners see more money? And what roadblocks remain for homeowners who want funds?

PPP: there is still money

Initially, Congress and President Donald Trump approved about $ 349 billion for small businesses struggling due to COVID-19. The program offered companies with fewer than 500 employees a loan that would convert to a grant if the money was spent primarily on payroll and the companies met other criteria. The program has proven to be extremely popular and the first round of funding sold out in just 13 days.

PPP secured a $ 320 billion replenishment on April 24, when Trump enacted a second bill. This money became available on April 27, and 43 days later, approximately $ 130 billion remains available. The overwhelming demand for the first round of funding has almost dried up.

A contributing factor has been the backlash against big companies like Shake Shack and Ruth’s Chris Steak House, who were technically eligible to apply for and receive large loans when the program was first launched, but ultimately returned the money afterwards. public outcry. Mnuchin ultimately urged listed companies to repay any loans, saying they had access to other capital and could not demonstrate their need in the spirit of the law.

As the money repaid was added to the funds available, small business owners began to fear that their loans would not be canceled. The law initially required landlords to rehire 75% of employees within eight weeks of receiving the loan, a requirement that proved unworkable as the foreclosure dragged on. Business owners were also waiting for other forgiveness directives than the Small business management was slow to roll out, raising fears that homeowners would be asked to repay loans they couldn’t afford.

After weeks of anxiety, Congress passed an extension for P3 recipients, giving companies 24 weeks to rehire 60% of their employees. Mnuchin further clarified on Wednesday that even companies that cannot meet the 60% payroll threshold may have part of their loan canceled, in proportion to the amount used for payroll.

Difficulties for minority and women owned businesses

Even with relaxed guidelines, some minority-owned businesses are always at a disadvantage when it comes to accessing funds.

The 90% figure Harris quotes comes from the Center for Responsible Lending, a nonprofit that works to eradicate predatory lending.

“Based on the structure of the program, we estimate that over 90% of businesses owned by people of color have been, or likely will be, excluded from the Paycheck Protection Program,” Ashley Harrington, Director of Federal Advocacy and senior of CRL. advice, told CBS News in an interview.

While the program is ongoing, it is unclear how many minority-owned businesses still have difficulty accessing funds. There are many documented reasons why the disparity exists.

The documentation required of small businesses to earn a rebate is complicated, which means small businesses without access to an accountant, lawyer, or other compliance staff face additional challenges. Capitol Hill lawmakers on Wednesday urged Mnuchin to simplify the red tape needed for forgiveness.

Existing banking relationships play a major role in the likelihood that a business will apply for and be successful in obtaining a loan. Many of the smaller businesses have never applied for a line of credit and have no relationship with a lender. According to a 2020 Federal Reserve report, 46% of white-owned businesses have obtained loans in the past, while only 23% of black-owned businesses have.

Big banks, like Bank of America, initially prioritized customers with existing lending relationships, forcing smaller businesses without a credit relationship to wait longer without access to funds.

The program excludes business owners convicted of felony, as well as those currently facing criminal charges. Mnuchin has said he is open to relaxing that guideline to exclude only those convicted in the past three years, although he has yet to issue formal guidelines.

The Inspector General of the Small Business Administration reviewed the PPP at the request of Congress and found that it did not prioritize socially or economically disadvantaged businesses, writing: Minority and women-owned businesses can not having received the loans as expected. The report also criticizes the SBA for not requiring applicants to provide demographic information, which could have facilitated tracking and avoided any racial, gender or geographic disparities.

Initially, PPP applications were only available in English. Now applications and information are available in 17 additional languages.

Government efforts to help minority-owned businesses

The second round of PPP included provisions that set aside money for certain types of banks and financial institutions, with the aim of ensuring that the money was directed to minority-owned businesses and businesses in poor communities. served.

$ 30 billion has been earmarked for community development financial institutions, aka CDFI, which are lenders that focus on helping low-income and disadvantaged entrepreneurs, or banks with less than $ 10 billion in assets. An additional $ 30 billion has been set aside for banks with assets between $ 10 billion and $ 50 billion.

As interest in PPP loans dried up, the SBA and Treasury announced they would set aside an additional $ 10 billion for CDFIs, which often help business owners who have never applied for a loan. credit before navigating the process.

One sign that the effort might be working is the fact that the average loan size fell from around $ 206,000 in the first round to $ 113,000 as of June 8, which perhaps means that more small businesses have access to capital at this critical time. .

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