From its first day in office, the Biden-Harris Administration has made delivering equitable relief to hard-hit small businesses a top priority. The latest data show that the Administration’s focus has resulted in a stunning turnaround from the previous Administration.
The pandemic was devastating to America’s small businesses and by January 2021, thousands of small businesses had closed, the unemployment rate was at 6.4 percent, and millions of Americans remained out of the workforce. While Congress had appropriated billions in small business relief in 2020, mom and pop businesses and those owned by women and entrepreneurs of color too often had been shut out of earlier relief efforts in the prior Administration. An October 2020 report issued by the House Select Subcommittee on the Coronavirus Crisis found that the prior Administration encouraged banks to limit their Paycheck Protection Program (PPP) lending to existing customers, which ultimately excluded many minority and women-owned businesses across the country. The subcommittee also noted that, under the prior Administration, the Small Business Administration (SBA) and Treasury Department failed to issue guidance prioritizing underserved markets.
This Administration has put equity at the heart of the delivery of more than $450 billion in small business relief since taking office. Within weeks of Inauguration, the Administration announced a number of policy changes to target the PPP to the smallest businesses and companies that have been left behind in previous relief efforts. Recent reports by the independent Government Accountability Office and academics Robert Fairlie and Frank Fossen found that Biden-Harris reforms to PPP helped result in a substantially higher share of loans going to small businesses in underserved communities, including communities of color.
Specifically, the reforms helped:
- Increase loans to small businesses in low to moderate income (LMI) communities by 62 percent. In 2021, the PPP made 2 million loans to businesses located in LMI communities, a 62 percent increase from the 1.2 million loans made to businesses in these communities in 2020.
- Expand lending to the smallest businesses by 35 percent. 6 million businesses with less than 20 employees received PPP loans in 2021, a 35 percent increase from the 4.5 million loans made to these businesses in 2020. More than 95 percent of 2021 PPP loans went to these businesses.
- Triple lending to microbusinesses. Nearly two-thirds of 2021 PPP loans went to Schedule C businesses, providing roughly 4 million of the smallest businesses – 35 percent in LMI areas – with $60 billion in forgivable loans. This tripled the amount of funding from the roughly $20 billion that went to Schedule C businesses in 2020.
- Reduce the average loan size by more than half. Thanks to the SBA’s success in reaching smaller businesses than under the previous Administration, the average PPP loan size under the Biden-Harris Administration was $42.5K. This was down more than 50 percent from the $101.5K average in the 2020 round of PPP. This reduction in average loan demonstrates that PPP reached more of the smallest businesses under the Biden-Harris Administration.
- Increase loans to rural small businesses by 40 percent. The number of PPP loans made to rural small businesses was up 40 percent from 2020, from 1 million in 2020 to 1.4 million loans made in 2021.
- Expand the number loans made by community financial institutions by a factor of 6. The number of PPP loans made by community financial institutions and minority depository institutions increased from more than 240,000 loans in 2020 to nearly 1.4 million loans in 2021. The loan volume nearly doubled, from $17.5 billion in 2020 to $29.9 billion in 2021 even as the overall size of the PPP program ($271 billion) decreased by nearly 50 percent from the $521 billion in loans made in 2020.
Overall, these changes ensured that the 2021 round of the PPP – which consisted of more than $271 billion in forgivable loans to nearly 6.4 million businesses – reached more of the smallest businesses and those located in low and moderate income (LMI) communities.
These efforts build upon the Biden-Administration’s overall efforts to help small businesses navigate the ups and downs of the COVID-19 pandemic. In 2021, the Administration distributed more than $450 billion in critical relief to more than 6 million small businesses through the Small Business Administration. In addition to PPP, this relief included:
- $28.5 billion to 100,000 restaurants, food trucks, street food vendors, breweries, and other food service businesses through the Restaurant Revitalization Fund. 27 percent of these businesses were located in LMI areas and 15 percent were from rural communities.
- Providing $14.2 billion in grants to nearly 13,000 theaters, live venues and other entertainment and cultural hubs. More than 90 percent of these grantees, or roughly 11,600, have 50 employees or less. These smallest of businesses received a total of $8.5 billion in awards.
- Providing more than 600,000 of the small business hardest hit by the pandemic with more than $7.5 billion in small grants through the Targeted Economic Injury Disaster Loan (EIDL) Advance program. All of these businesses are located in LMI areas.
- Providing more than $125 billion in low interest, long-term loans through the COVID EIDL program to more than 650,000 small businesses. Overall, 95 percent of COVID EIDL borrowers have less than 20 employees, nearly one-fourth were located in LMI areas, and 14 percent were in rural communities.