(Washington, D.C.) – U.S. Senate Committee on Small Business & Entrepreneurship Chair Ben Cardin (D-Md.) released a statement today on an independent report drafted by economists Robert Fairlie and Frank M. Fossen. It is the second report to confirm that the equity-focused policies championed by Cardin since the beginning of the COVID-19 pandemic increased access to Paycheck Protection Program (PPP) loans for underserved small businesses, especially those in minority communities.
“From the drafting of the CARES Act in March 2020 to now, ensuring that underserved small businesses are not left behind by the federal government’s COVID-19 relief programs has remained my top priority,” Cardin said. “This report reaffirms that the equity-focused policies enacted in the bipartisan Economic Aid Act and the American Rescue Plan delivered PPP loans more equitably in 2021 than during prior rounds of PPP. These results also confirm that the federal government is able to address the historic, pervasive barriers that underserved entrepreneurs face through thoughtful and intentional policies. As we continue to address the pandemic and in the years to come, Congress should build on this success to deliver results for underserved small business owners.”
The researchers found that while the first round of PPP, which ran from passage of the CARES Act in March 2020 until funds were exhausted in early April, favored larger businesses with strong lender relationships, both subsequent rounds of PPP saw an improvement in the share of loans to underserved small businesses, with the third round—January 2021 through May 2021—being the most equitable.
The report specifically noted that empowering Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) to participate in the program and establishing a priority period during which only those institutions and other community lenders could issue PPP loans ensured that small businesses in underserved communities received access to the program during the third round. For example, CDFI lender Prestamos, which targeted Hispanic business owners, had the 4,274th highest volume of PPP loans among lenders during the first round of PPP, but had the highest volume of loans by the end of the third round in May 2021. This incredible improvement is a direct result of actions taken by Congress and the Small Business Administration to expand access to underserved businesses.
The report’s findings are in line with a Government Accountability Office report issued in September of last year, which found that the number of PPP loans made to businesses in traditionally underserved counties was proportionate to their representation in the overall small business community in the third round of lending from January 2021 to May 2021 when the program closed.
Cardin has championed these equity-focused policies since the beginning of the pandemic as Senate Democrats’ lead negotiator of Congress’ small business relief efforts during the COVID-19 pandemic. Cardin helped establish PPP through the CARES Act in March 2020. Along with Senator Jeanne Shaheen (D-N.H.), Cardin drafted a provision of the CARES Act that required the SBA to issue guidance to financial institutions participating in PPP to prioritize loans for underserved small businesses. In April 2020, Cardin secured a $60 billion set-aside for smaller lending institutions participating in PPP, such as credit unions, community banks, CDFIs, and MDIs that better reach underserved businesses. In the bipartisan Economic Aid Act passed by Congress in December 2020, Cardin also secured an additional $30 billion set aside for community lenders and $35 billion for borrowers who were unable to apply for an initial PPP loan.