Since its first day in office, the Biden-Harris administration has made providing equitable relief to hard-hit small businesses a top priority. The latest data shows that the direction of the administration has resulted in a stunning turnaround from the previous administration.
The pandemic has been devastating for American small businesses and by January 2021 thousands of small businesses had closed, the unemployment rate was 6.4% and millions of Americans remained out of the workforce. While Congress appropriated billions for small business relief in 2020, family businesses and those owned by women and entrepreneurs of color had too often been left out of previous relief efforts by the previous administration. A October 2020 Report published by the House Select Subcommittee on the Coronavirus Crisis revealed that the previous administration encouraged banks to limit their Paycheck Protection Program (PPP) loans to existing customers, which ultimately excluded many businesses owned by minorities and women across the country. The subcommittee also noted that under the previous administration, the Small Business Administration (SBA) and the Treasury Department did not issue guidance prioritizing underserved markets.
This administration has placed equity at the heart of the delivery of more than $450 billion in support for small businesses since taking office. Weeks after the inauguration, the administration announced a number of policy changes to target PPP to smaller businesses and businesses that have been left behind in previous relief efforts. Recent reports from Independent Office of Government Accountability and academics Robert Fairlie and Frank Fossen found that The Biden-Harris PPP reforms have helped dramatically increase the share of lending to small businesses in underserved communities, including communities of color.
More specifically, the reforms have made it possible to:
- Increase small business loans in low-to-moderate income communities by 62%. In 2021, the PPP provided 2 million loans to businesses located in LMI communities, a 62% increase from the 1.2 million loans provided to businesses in these communities in 2020.
- Increase lending to smaller businesses by 35%. 6 million businesses with less than 20 employees received PPP loans in 2021, a 35% increase from the 4.5 million loans issued to these businesses in 2020. More than 95% of 2021 PPP loans are went to these companies.
- Triple loan to micro-enterprises. Nearly two-thirds of 2021 PPP loans went to Schedule C companies, providing about 4 million of the smallest businesses – 35% 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 companies in 2020.
- Reduce 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 $42.5,000. This is down more than 50% from the 2020 PPP round average of $101,500. This reduction in the average loan demonstrates that PPP has reached more small businesses under the Biden-Harris administration. .
- Increase lending to rural small businesses by 40%. The number of PPP loans granted to rural small businesses increased by 40% compared to 2020, from 1 million in 2020 to 1.4 million loans granted in 2021.
- Multiply by 6 the number of loans granted by community financial institutions. The number of PPP loans issued 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 volume of loans nearly doubled from $17.5 billion in 2020 to $29.9 billion in 2021 even as the size of the PPP program ($271 billion) has shrunk by nearly 50% from the $521 billion in loans made in 2020.
Overall, these changes ensured that the 2021 round of PPP – which consisted of more than $271 billion in forgivable loans to nearly 6.4 million businesses – reaches more businesses. among the smallest and those located in low- and moderate-income (LMI) communities.
These efforts build on the Biden administration’s overall efforts to help small businesses weather the highs and lows 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 the PPP, this relief included:
- $28.5 billion to 100,000 restaurants, food trucks, street vendors, breweries and other catering businesses through the Restaurant Revitalization Fund. 27% of these businesses were located in LMI regions and 15% were from rural communities.
- Providing $14.2 billion in grants to nearly 13,000 theaters, performance venues and other entertainment and cultural centers. More than 90% of these beneficiaries, approximately 11,600, have 50 or fewer employees. These smaller companies received a total of $8.5 billion in rewards.
- Providing more than 600,000 of the small businesses hardest hit by the pandemic with more than $7.5 billion in small grants through the Economic Disaster Targeted Loan Advance (EIDL) program. All these companies are located in IMT zones.
- Providing over $125 billion in long-term, low-interest loans through the COVID EIDL program to over 650,000 small businesses. Overall, 95% of COVID EIDL borrowers have less than 20 employees, almost a quarter were located in LMI areas and 14% in rural communities.