How to Make PPP Work for Every Small Business Owner

Covid-19 has caused unprecedented economic disruption for small business owners (SBOs). Federal stimulus funding, such as that provided by the Paycheck Protection Program (PPP), aims to ease some of the worry SBOs face. But data collected by Gallup between mid-March and mid- July illustrates the truly uneven impact of benefit felt by small business owners across gender and racial lines, as well as by the size and location of the company.

The first round of the stimulus package released through the CARES act ran out of money in 13 days and it mostly benefited not-so-small and, in many cases, thriving businesses that had a relationship with a large banks. Meanwhile, non-employers, nonprofits, and small businesses with fewer than 20 employees struggled to make payroll or pay benefits and utilities. This raises serious questions about the efficacy of the policy initiative that was designed to help business owners struggling with the economic fallout of COVID-19.

SBOs face extreme uncertainty 

That impact has been excruciating. As of June 14, 2020, 4% of all small businesses have closed permanently, 13% are temporarily closed and 31% are operating with reduced staff and hours.  But that dismal outcome has been disproportionately endured: about 30% of the businesses in United States are owned by minority business-owners. Of these 9.6% have closed. On the other hand, only 2.6% of white-owned businesses have closed. Similarly, twice as many non-employer businesses (6.5%) than employer businesses (2.7%) have ceased operation.

Small businesses are the engine of the US economy and a prime employer, so widespread closures affect everyone. The pain is sharpest for the small business owner, of course, but the hardest hit tends to have fewer resources and a uniquely important role in their community.

“You don’t see a lot of successful business owners coming from the Reservation,” says Lynnferd Begay, a member of the Navajo Nation who owns Elle’s on Main, a restaurant in Crete, Nebraska that closed its dining room March 13th. Begay has been offering curbside pickup since, but he says revenues are down 80%, and his staff has been reduced from 13 people to five. “I know that my success means a lot to my people. It’s shared success. But if my decisions [about operating during the pandemic] make a customer or employee sick, that’s all on me.”

PPP application process

Transparency from the government regarding the distribution of PPP relief has been uneven. While discoveries regarding the types of organizations that have received a disproportionate amount of aid have raised questions about how funds are disbursed, systematic information about small business owner’s understanding of and engagement with the program has been spotty, in part because of intentional decisions by the Treasury Department to withhold it.

As of July 14, 2020, data from the Gallup Panel shows the vast majority of SBOs believe they are ineligible for PPP funding. White males are more likely than others to believe they are eligible for funds, but even then, less than a quarter of them understand this. They’re also likelier to have more than 20 employees (49%) — not surprising as SBOs with employees were the first to be invited to apply to PPP, putting non-employer businesses behind in the first-come, first-served program. Non-employer businesses are less likely to say they are eligible to apply (10% vs. 28% for employer businesses).

When asked “Have you tried to apply for PPP in the past 30 days?”, only 16.5% of small business owners agreed to have done so. The most common type of applicant is male ( 18.5%), – Hispanic (19%), business owners living in  cities( 20%) and those with more than 20 employees (38%).

These numbers don’t necessarily indicate lack of desire for PPP funding – often they reflect lack of understanding. PPP forms can be confusing and SBOs don’t always know how to fill them out. Many SBOs have no business connection to a mainstream financial institution, and some are unclear about loan forgiveness.  

Further complicating all of this is the inflexibility regarding PPP payouts. The 75/25 rule, which has since been amended to 60/40 per the SBA and DOJ guidelines, means that loans are only forgiven if 60% of the money is spent on payroll. Yet businesses that are temporarily or partially closed have little or no payroll but the same operating expenses — rent, mortgage interest and utilities, purchasing or retrofitting of safety equipment. Under the revised rules, SBOs now have up to 24 weeks to restore their workforce levels and wages to the pre-pandemic levels. However, with far fewer customers and many employees unwilling to come back due to risk of being exposed to Covid-19, business owners are unsure if and how many employees they should bring back within the next 24 weeks to qualify for full loan forgiveness.

Of the SBOs who applied for the loan, about 56% have been approved for PPP. As expected, the approved are likely to be male (57%), white (62%), and have more than 20 employees (72%).

Despite revision to the rules and added flexibility, SBOs are seeing little benefit in applying: when asked if PPP will help their businesses,  47% of SBOs strongly disagree, and strong disagreement is higher among women ( 49%), business owners in small towns or rural areas (48.5%) and among non-employer SBOs ( 57%).

SBOs feel unsupported by local and Federal agencies

Understandably, therefore, SBOs do not feel supported by local or federal agencies. Forty- six percent feel unsupported by their local community – especially male (50%), non-white (52.3%), rural (59%) and non-employers (49%).  Sixty-eight percent do not feel supported by their local government, with male SBOs (72.5%), those living in small towns/rural areas ( 83%), and employer businesses with less than 20 employees ( 70%) being the most critical of their local government. Almost 62% do not feel supported by the federal government. In this case, more non-white (66%), rural (70%) and non-employer business owners (71%) are more critical of the Federal government.

Where to Go from Here

When so many people with so little in common say the same thing about a program – “I’m not eligible, it’s confusing, it won’t help – there is a problem with the program, mainly with implementation.  And implementation can be changed to engineer a more equitable recovery to the COVID-19 crisis.

  • 80% of SBOs plan to reopen their businesses. If the PPP application process were easier and more accessible to the most vulnerable small businesses — those without technical know-how or connections to mainstream financial institutions – they’d be likelier to access funds and stabilize their businesses.
  • Assure targeted assistance for women and minority business owners, especially those with fewer than 20 employees, to speed their transition back to business. 
  • Given the possibility of multiple waves of COVID-19, extend the 24-week window, in which borrowers must use the money, to 48 weeks so SBOs have enough time to return to pre-virus staffing levels and achieve loan forgiveness. Forty-eight weeks will enable businesses to bring employees back as customer demand requires- not out of fear of losing their loan forgiveness or losing the employees to a competitor — and ramp up quickly once the shelter-in-place is over. Federal unemployment booster must continue until there is enough labor demand for businesses to hire back the furloughed or laid off employees.
  • PPP must include specific funds for operational costs such as – rent, mortgage interest, utilities, and purchase or retrofitting of businesses with safety equipment. 
  • It is imperative that State or Federal agencies come up with standard public-health guidelines so small businesses can open in a safe and sustainable way by adhering to a uniform P.P.E. for their employees and customers.
  • Cities and towns across America need a data-driven approach to reopening. Small businesses need reliable, easy-to-compare hyperlocal business, healthcare, and education sector data relevant to recovery. Open data portals that collect and display range of indicators such as hospital occupancy rate, infection rate, or business stats such as number of visitors in malls, restaurants, and parks, and local spending, or educational stats like the number of school openings and student attendance, could prove invaluable for small businesses charting their post-pandemic recovery course. 
  • It is not enough to bring things back to the pre-CovidCOVID level, but rather use this opportunity to leapfrog into the “next normal.” Grants and small loans to SBOs for technology upgrades will go a long way in helping them modernize their systems, automate their processes, and create a strong digital presence, making them more competitive in their markets
  • Reskill displaced workers. The demand for skilled workers is likely to increase in fields such as artificial intelligence, robotics, and e-commerce. Businesses, in collaboration with educational institutions, philanthropies, and state and local governments, must invest in reskilling the displaced workforce.  

There’s no time to wait. Government stimulus spending is only as good as its implementation is effective. Gallup data shows that so far, the implementation has had inequitable results. Meanwhile, SBOs are closing shop permanently and each shuttered business is an economic loss to an individual and a community. Instead of one-size-fits-all, targeted policy options and strategies must be developed to suit the needs of a diverse SBO population.

Contreras-Sweet served as Administrator of the Small Business Administration from 2014 to 2017. Badal is Gallup’s principal scientist for entrepreneurship and job creation. 


Results for this Gallup poll are based on self-administered web surveys conducted from March 19 to July 14, 2020, with a random sample of over 35,000 U.S. adults, aged 18 and older, who are members of the Gallup Panel. Of those surveyed, 3,684 self-identified as small business owners (less than 500 employees). Gallup uses probability-based, random sampling methods to recruit its Panel members.

Gallup weighted the obtained samples to correct for nonresponse. Nonresponse adjustments were made by adjusting the sample to match the national demographics of gender, age, race, Hispanic ethnicity, education, and region. Demographic weighting targets were based on the most recent Current Population Survey figures for the aged 18 and older U.S. population. For results based on the sample of U.S. adults, the margin of sampling error is ±3 percentage points at the 95% confidence level. For results based on the sample of small business owners the margin of sampling error is ±3.7 percentage points at the 95% confidence level. Margins of error for subgroups are higher. The margin of error considers the design effect from weighting.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

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