Democrats are renewing their call for more rigid Paycheck Protection Program set-asides for credit union and community banks, following reports from a government watchdog contending that program funds may not be reaching the neediest businesses.
“Not only did [the Small Business Administration] fail to issue guidance to prioritize the paycheck loan applications of underserved and rural small businesses, the agency implemented a ‘first-come, first-served’ policy that made it harder for vulnerable small businesses to access PPP,” Senate Small Business Committee ranking Democrat Ben Cardin (D-Md.) said, following the release of a report by the Small Business Administration’s Inspector General.
The IG released a report on Friday stating that the SBA had failed to provide guidance to banks to help ensure that PPP loans reached small businesses that need them the most. The IG also reported that the SBA failed to collect sufficient demographic information from businesses to evaluate the program.
Other critics of the PPP program have alleged that large banks were able to help their best customers obtain easy access to the loans at the expense of smaller financial institutions, including credit unions.
Lawmakers on both sides of Capitol Hill are crafting the next round of coronavirus economic stimulus legislation. House Democrats are attempting to write a comprehensive recovery plan for individuals and businesses that could be released this week
On Sunday, Cardin and Sen. Cory Booker (D-N.J.) released a plan they said would increase accountability in the PPP program and ensure the participation of community financial institutions.
Among other things, their plan would:
- Require daily reporting of the total number and dollar amounts of SBA loans, and weekly reports providing demographic information.
- Assist Community Development Financial Institutions seeking approval as PPP lenders
- Set aside at least $10 billion in PPP funds for CDFIs and minority institutions that have a demonstrable record of reaching underserved borrowers.
- Set aside $1 billion for the overall CDFI program to help financial institutions with their own capital needs.
Other lawmakers are floating the idea of eliminating financial institutions from the SBA business assistance program altogether, contending that Internal Revenue Service records could be used to verify a company’s payroll. The records could be used to provide funds to businesses to pay their employees.
“The U.S. banking system is not responsive enough to the needs of small and medium-sized businesses to process this volume of loans effectively,” Rep. Pamila Jayapal (D-Wash.) recently said.
Senate Finance ranking Democrat Ron Wyden (D-Ore.) told Yahoo! Finance on Friday he wants to help the “smallest of the small businesses” by making it easier for them to apply for loans. “Let’s not put them through the banking system again from A to Z,” he said.