(Washington, DC) — Committee on Small Business & Entrepreneurship Ranking Member Ben Cardin (D-Md.) today spoke on the Senate floor about the current state the federal government’s COVID-19 small business relief programs. Cardin’s remarks follows the committee’s first oversight hearing on the programs, during which committee members heard from small business owners and advocates, and comes ahead of a scheduled hearing with Treasury Secretary Steven Mnuchin and Small Business Administration Administrator Jovita Carranza.
Cardin’s remarks may be viewed here; the full text follows:
Madame President, I take this time as the Ranking Democrat of the Senate Small Business and Entrepreneurship Committee of the United States Senate, to update my colleagues on the implementation of the CARES Act. I think all of us know that the CARES Act contained major new provisions to help small businesses, and I was proud to be part of a bipartisan working group with Senator Rubio, Senator Shaheen, and Senator Collins that helped craft three new programs to help small businesses as a result of COVID-19.
We recognize the importance of small businesses to our economy, to job growth, and to innovation. But we also recognize that small businesses are more vulnerable to an economic downturn. They don’t have the resiliency, the deep pockets, the liquidity, that larger companies have. If we’re going to get our economy back on track, we have to preserve small businesses and their workforce. So we suggested, and the Congress passed, three new programs to help small businesses: the Paycheck Protection Program, the Economic Injury Disaster Loan and Grant Program, and a loan forgiveness program for existing loans and loans taken out under 7(a), 504, or Microloans.
We recognize that all three of these tools were important—they were not exclusive. They work together. PPP provides help to keep a payroll together, by 8 weeks of payroll. The EIDL loan program provides working capital for small businesses, and the grant program provides immediate cash. The forgiveness program allows a business to be able to get through these next six months without the burdens of having to pay their loans. All that works together to keep small businesses viable in our community.
Let me first talk about the Paycheck Protection Program, because that has certainly gotten the most attention. It provide eight weeks of payroll relief, plus other expenses for small businesses in this country. It has been very popular. In fact, the original amount of money we authorized for loans—about $349 billion—was quickly used up, so we authorized an additional $310 billion of loan authority.
There have been 4.4 million loans issued under the PPP program for a total of $510 billion. These loans were issued rather quickly, considering the standing up of a new program and the volume of interest. I want to acknowledge the hard work of the Small Business Administration and their workers, as well as Treasury, in standing up this program and getting the money out quickly to save many, many, many, small businesses in our community. When we passed the PPP program, we would have hoped that 8 weeks later, our economy would have been in the position where small businesses in large number would not need additional help, or that the programs parameters were adequate. Well, that was not the case.
Yesterday, this chamber acted in a responsible way and legislation that Senator Rubio and I, and others, along with House colleagues, had recommended to our colleagues, that would give small businesses that have existing PPP loans the discretion to use those funds over a 24 week period, rather than an 8 week period, recognizing that many of these businesses cannot get up to full payroll during this 8 week period. We also gave greater flexibility on the allocation of the funds.
Even with these changes, there have been many challenges with bringing forward the PPP program. First and foremost, we have unfortunately found—as we thought might happen—that the underserved and underbanked community would have a much more difficult time in getting access to 7(a) loans under the PPP program. Quite frankly, we put language in the CARES Act so that SBA would give special attention to the underserved and underbanked community. The SBA did not follow our direction. The SBA IG said that the Small Business Administration “did not fully align” with Congressional intent to help the underserved and rural markets.
So we responded. We replenished the PPP funds, we allocated a certain amount of those funds to smaller lending institutions recognizing that they have greater contact with the underserved communities. And it did help.
At our request, Treasury has now allocated an additional $10 billion through the CDFIs, the Community Development Financial Institutions, that have better ties to the underserved community.
Each one of these steps helped. Allocating funds to smaller lenders and allocating funds to CDFIs will help us get to minority owned small businesses, will help us to get women owned small businesses, will help us get to veteran owned small businesses, will help us get to the smaller of the small businesses, will help us get to rural small businesses. But we need to do more.
That’s why I authored legislation with Senator Booker. We have put out a plan on what needs to be done through a discussion document, and it recognizes that we have to provide greater help for businesses in underserved communities, for startup capital, for technical training, and for mentorship. All of that will help, so that when we come out of COVID-19 and when we have the next economic downturn, we have the financial institutions and knowledge in all of our communities to take advantage of the tools that we make available in a timely way.
We had our first oversight hearing yesterday in regards to COVID-19 and the tools of the Small Business Administration. That hearing had outside public witnesses and private sector witnesses Next week, we’ll have Secretary of the Treasury as well as the SBA Administrator before us.
What we heard from one of our witnesses yesterday, Connie Evans of the Association for Enterprise Opportunity, said that, in talking about COVID-19, “its economic consequences are projected to erase decades of minority enterprise growth in underserved markets.”
She continued: “To prevent this, we believe policymakers must acknowledge the existing disparities in our small business ecosystem and take the necessary steps to create equitable legislation to ensure that vulnerable businesses survive and thrive in the years ahead.”
I couldn’t agree more. That’s why Senator Booker and I have issued our discussion document that includes many ways that we can bring about systematic changes to really help in the underserved communities.
We saw tragically two weeks, or close to two weeks ago, the tragic death in Minnesota. We’ve all talked about how we’re going to help to make sure this country gives equal opportunity to all of our citizens, including under the criminal justice system. We also need to recognize that if we’re going to deal with the wealth gap in America, then we have to deal with entrepreneurship. This is one way we can do that, by building up these types of opportunities.
There is some good news in my state of Maryland that I want to share with my colleagues. Maryland had a very active Women’s Business Center. As you know, our resource partners are critically important to helping underserved and underbanked communities. Women-owned businesses are clearly in that category. We have a very effective Women’s Business Center that is headquartered in Rockville that helps serve Montgomery and Prince George’s County and Frederick. They’re doing a great job on behalf of women-owned businesses.
But Maryland is a big state, and we needed more help. So I want to thank the Small Business Administration for the announcement of two additional small business centers in the state of Maryland—one will be in Baltimore, housed at Morgan State University, a historic HBCU, and will provide tremendous help to women-owned businesses and minority women-owned businesses. We are also opening up a center in Salisbury, on the Eastern Shore of Maryland in rural Maryland, to help women-owned businesses.
This is critically important to deal with the gap in our community. Resource partners are a critical need.
As we applaud the work that we’ve done with the PPP program, we recognize that we need to improve it. Let’s also recognize that we need to deal with making sure that there is fair opportunity for all businesses to qualify.
But we are also going to need additional help for small businesses in addition to the PPP initial grant. There is going to need to be a second round. Let me tell you why. When we passed this program, we thought that 8 weeks would be enough. But we know that for some of the original small business loans that were taken out under the PPP program, that within the next two weeks, that 8-week period will expire. We know that businesses are not yet open at full capacity. Restaurants cannot open at full capacity. Catering establishments cannot open at full capacity. Health clubs cannot open at full capacity. Entertainment centers cannot open at full capacity. We know that. Museums are still very much hurt. We’re going to need additional help.
We heard yesterday from Joe Shamess, a small business owner whose company was helped by a PPP loan, and he told us that “there will be additional need for bridge funding for small businesses experiencing unanticipated costs during phased-in reopening plans.”
I agree with Mr. Shamess. I think we’re going to need to do more to help the small businesses in our community. I’ve been working with Senator Shaheen and Senator Coons, and others, to say on the second round, let’s try and target that relief to businesses that really need it.
The first round, get the money out quickly. We were very successful at doing that with minimal amount of underwriting requirements by the small businesses or the banks. We got the money out quickly. On the second round, we need to be more discerning. We need to focus those funds on the small businesses who really need it: those in the underserved community, the smaller of the small businesses. We heard that yesterday during our oversight hearing. Those businesses have had a dramatic loss in revenue. If we do that, the resources are there. We can help these small businesses survive and we can do it in a way that can keep our economy going.
We need to do that immediately. We shouldn't wait two or weeks, after the program for many small businesses has already ended. We need to provide the help as soon as possible. That's another reason why it's important that we take up the next stimulus package during this work period and not wait until businesses have to lay off their workers and maybe not be able to reopen.
But that— the PPP—was only one of three tools. The second tool that we provided was a new initiative under the EIDL program, the Economic Injury Disaster Loan program, for grants. Immediate cash which small businesses need during a disaster—cash. The proposal would allow for a $10,000 grant to be made, and we anticipated that that grant would be made within three days. We put that in the statute.
Now, as complimentary I have been about SBA starting up the PPP program, I am extremely disappointed in the manner in which the EIDL program has been handled. They did not get the money out quickly. They did not get $10,000 out. Instead, the average grant is between $4,000 and $5,000 and there's $10 billion still left in the coffers that could have gotten out to small businesses who desperately needed the cash. And they didn't do it within the time period that Congress anticipated.
The loan program, the existing loan program—this existed before COVID-19 where SBA issues loans during a disaster, Economic Injury Disaster Loans. It provides the working capital, it works with PPP. PPP is not enough help for a small business to get the working capital and inventory that they need. That’s why we have the EIDL loans. They have been very slow, the SBA, in getting the loans out. The numbers are extremely disappointing.
Now they've set up new rules. They’ve closed the window for nonagricultural small businesses. Why? I have no idea. And they seem to be limiting loans to $150,000, although the law provides for a $2 million cap. Why are they doing that? If the programs are going to work together, they have to implement this program. Congress specifically intended COVID-19 to be a disaster covered by EIDL. We did that in our early stimulus package.
Well, we are disappointed that we haven't had greater success in the EIDL program because weigh know it works so much closer with the PPP program and it's particularly useful for smaller small businesses and those that are more vulnerable.
Let me, if I might—we had a witness yesterday, Nick Rudolph of Maryland Capital Enterprises, who testified and said, “the EIDL loan is a particularly impactful product because its low interest, long-term, eased credit requirements and the fact that collateral is not required. In a perfect world, all would receive the full grant regardless of the number of employees.” Mr. Rudolph is saying they limited the grant to $1,000 per worker. Therefore, if you had ten or fewer workers, the most vulnerable small businesses, you're not able to get the full advantage of the $10,000. We hope that that would be corrected.
Now, there is a third tool and that is the loan forgiveness for existing 7(a) and 504 loans and Microloans and loans taken out during the six-month period after the adoption of the bill, through the end of the year. So this gives six months of debt relief for loans that can really help small businesses. I would like to tell you how that's working, but I don't have a lot of numbers 0n that. Which leads me to the need for data. If we're going to be carry out our oversight function and be able to enact legislation moving forward, we need to know how the programs are working today and we haven't gotten the information we need.
Earlier, I offered a letter with Senator Schumer and Wyden asking the SBA and Treasury to make that information available. Most recently, I joined Senator Rubio in a similar request asking the Small Business Administration and the Treasury to make this information available. I've introduced legislation with Senator Shaheen on this issue. We need to get that data if we're going to do our oversight. This week we had the private-sector witnesses. Next week, we're going to have Administrator Carranza, the Administrator of the SBA and Secretary Mnuchin, Secretary of the Treasury, to ask specifically about these points. A very, very important hearing.
Madame President, in closing, let me say that we’ve got to continue to work together as we have in the past to help America's small businesses. They are the literally the growth engine of our economy. They are the innovators of our economy and they’re the most vulnerable. The CARES Act provided incredibly important help, but we're going to have to pay additional attention to help our small businesses. So let's continue this bipartisan effort to not only help small businesses but to help our economy and to help our country. In doing that, we will truly perform as we should during this national emergency. So I look forward to continuing to work with my colleagues on both sides of the aisle to pay attention to what we've already done for small businesses and give them the additional attention that they need.
Thank you Madame President. I yield the floor.