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GAO Report: PPP Changes Effective in Meeting Needs of Smaller, Underserved Businesses

  • Government Accountability Office finds that Small Business Administration changes to the Paycheck Program had their intended effect of improving access to forgivable loans
  • Steps taken to improve loan access for very small businesses as well as those owned by women, minorities, and veterans
  • Loans to businesses with fewer than 10 people remained disproportionately low, but had improved over time

Summary by Dirk Langeveld

Changes to the Paycheck Protection Program were effective in making forgivable loans more accessible to very small businesses and underserved entrepreneurs, according to a recent assessment by the Government Accountability Office.

The GAO found that the percentage of PPP loans was proportional to the share of different types of businesses or counties by the time the program ended, including rural counties, high-minority counties, counties with high women business ownership rates, and counties with high veteran business ownership rates. Lending to businesses with fewer than 10 employees remained disproportionately low, but increased over the course of PPP’s three lending rounds.

The first round of PPP funding was disbursed between April 3 and 16, 2020, and its quick depletion raised concerns that the money was inaccessible to many businesses. GAO data found that these funds were disproportionately approved for larger small businesses and those in rural areas. Forty-two percent of initial loan recipients had between 10 and 499 employees, despite making up just 4 percent of small businesses overall. Rural recipients accounted for 19 percent of the loans in the first round of funding, but represent just 13 percent of all small businesses.

The SBA and Congress took steps to expand the number of lenders participating in the program, approving 600 new entities before the second round of funding took place between April 27 and Aug. 8, 2020. These included non-banks, with funding targeted to minority-owned and very small businesses through community development financial institutions. In the final round of funding, which ran from Jan. 12 to June 30 of this year, changes included a 14-week exclusive application period for businesses with fewer than 20 employees and a revised loan calculation formula for self-employed applicants.

SBA Administrator Isabella Casillas Guzman said she was pleased with the findings, saying they show that her efforts and those of the SBA civil servants were successful in broadening access to the program.

“Main streets and industrial centers in every ZIP code across America are coming back to life and leading the way in our nation’s economic recovery, and we’ll continue working with our small businesses to help them strengthen our communities, create new jobs, and set our economy back on track,” said Guzman.

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