Massachusetts Attorney General Maura Healey is spearheading a coalition of 24 attorneys general asking Congress to make key changes to the Small Business Administration’s Paycheck Protection Program as part of any additional funding. Joining her are the attorneys general from Connecticut, Maine, Rhode Island, and Vermont.
The attorneys general feel the program has been implemented in such a way that funds have been excessively distributed to large, well-connected corporations. The coalition asserts that both the first and second rounds of funding with this program have left many of the hardest hit small businesses across the country underserved.
Healey wrote in the letter, “the PPP rollout exposed a variety of shortcomings, many of which can and should be eliminated going forward. First, at the expense of small businesses in desperate need of capital, numerous loans were made to large, publicly traded companies that almost certainly have access to other sources of funding. In addition, $152.4 billion, or nearly 45% of the total funds in the first round, went to loans of over $1 million, suggesting that larger, more well-connected companies may have been better able to navigate the application process.”
In its letter, the coalition calls for Congress to adopt the following measures before they allocate additional PPP funding:
- Increase Fair Access to Funding for Small Businesses: The coalition of attorneys general calls for Congress to require the Small Business Administration (SBA) to provide stronger, explicit guidance to lenders to ensure that funding goes to small businesses and not large, publicly traded companies. Additionally, the coalition urges Congress to adopt rules that prohibit lenders from giving preference to certain categories of customers over others, such as existing, larger customers or customers whose current debts could create conflicts of interest for the lender.
- Ensure Equitable Distribution: The coalition calls for a portion of any future funding for the program to be allocated exclusively for minority-owned small businesses, for funding to be fairly distributed across metropolitan areas, and for small banks and credit unions to be fairly represented as lending sources involved in the program. The coalition also calls for the SBA to create a simple and straightforward process for “unbanked” or “lesser-banked” small businesses or those that do not wish to apply through their current financial institution to receive funding.
- Better Communication and Transparency: The coalition urges Congress to direct the SBA to provide more direct guidance to businesses during the application process. They also call for the SBA to be required to disclose more granular data on the percentage of loans in various size categories; the number and amount of loans processed by each lender; the geographic distribution of all loans by metropolitan statistical area and borrower demographics, including gender, race, and ethnicity; and comprehensive data on the businesses that receive funding.
- More Flexibility and Technical Support: The coalition believes that the PPP does not adequately serve small businesses and requires more flexibility. The coalition calls for longer time limits for businesses looking to rehire employees, that businesses be able to allocate a smaller amount of revenue towards salaries in order to qualify, and for expanding qualifications for loan forgiveness. They also urge Congress to provide the SBA with greater funding to improve technical support and mandate a uniform, user-friendly process for use by lenders.
Joining Healey in sending the letter to Congress are the attorneys general of California, Colorado, Delaware, Hawaii, Iowa, Illinois, Maryland, Michigan, Minnesota, New Mexico, New York, Nevada, North Carolina, Oregon, Pennsylvania, Virginia, Washington, Wisconsin, and the District of Columbia.