Trump Administration Ignored CARES Act Provision Aimed at Prioritizing High-Need Small Businesses
The Trump Administration’s disbursement of small business aid in response to the coronavirus crisis has been roundly criticized for prioritizing corporations, wealthy CEOs, and Trump allies over actual small businesses. A recent report from the Small Business Administration’s Inspector General detailed just how the Small Business Administration (SBA) ignored high-need small businesses in direct violation of the law’s intent.
The CARES Act explicitly states the SBA should give lenders instructions to prioritize “entities in underserved and rural markets, including veterans and members of the military community, small business concerns owned and controlled by socially and economically disadvantaged individuals, women, and businesses in operation for under 2 years.” But the Trump administration did not tell lenders how to do this, nor how to keep track of progress.
The report concluded the Trump Administration failed to issue any guidance to lenders outlining how they should do this. To make matters worse, the Trump Administration did not require lenders to collect critical demographic data to help them track progress toward meeting one of the legislation’s goals.
As a result, reports showed that 90 percent of women- and minority-owned small businesses were shut out of the Paycheck Protection Program as of April 22.
Who are these high-need small businesses, often minority and women owned, the Trump Administration shut out?
Terra Cafe in (Baltimore, MD). “Baltimore café owner Terence Dickson is desperately calling everyone he knows for some kind of help with his relief applications. He’s down to his last few hundred dollars in the personal savings account he’s been using to pay his staff. He has tried Bank of America, with which he has a business checking account; his personal bank; politicians who have used his café for campaign events; and even the Maryland lieutenant governor’s office. […] But neither he nor his fellow business owners in the “Black Wall Street” of Baltimore have had any success. ‘I’m tired of hearing about the money. I want to see the money,’ Dickson said. Following inquiries from NBC News, Bank of America discovered that Dickson’s PPP application didn’t appear in the system, and it added him in.” [NBC News, 04/29/2020]
FarmGirl Flowers (San Francisco, CA). ‘It’s not what you think it is’: The government’s bailout loans are failing small businesses like mine, says Farmgirl Flowers’ CEO. “Christina Stembel founded her floral company, Farmgirl Flowers, in her dining room in 2010, using her personal savings and a cash-back credit card to cover business expenses. The company has since blossomed into a thriving startup that employed almost 200 staff members prior to the coronavirus. However, as the pandemic causes economic fallout worldwide, Stembel told Business Insider that the future of her company is uncertain. She said the process of applying for the first round of the Paycheck Protection Program, a government fund meant to help small businesses through the coronavirus pandemic, was frustrating and fruitless. “I know that the intention of this program is to help small businesses, so let’s change it to make sure this money does fall into the hands of small businesses,” she said.” [Business Insider. 04/30/2020]
Your Taxi Inc (Chesterfield, VA). “Your Taxi Inc., based in Chesterfield, is lucky in a way. Owner Karen Barrett’s business has a loyal cadre of clients who don’t drive and rely on her service to get them to and from doctors’ appointments, dialysis and other health care needs. […] She applied early on for a loan through the federal Paycheck Protection Program, but like many small businesses, she’s received nothing yet.” [Virginia Mercury, 05/04/2020]
Common Ground Coffee Shop (Beaufort, SC). “On the first day that funds for the initial $349 billion Paycheck Protection Program became available, Ramona Fautini, owner of Common Ground coffee shop in Beaufort, applied ‘almost immediately’ through her bank. That was over two weeks ago, and her application remains in line with hundreds of others…‘The whole process was supposed to be easy for small business. I filled everything out and waited,’ she said. ‘Mine was never approved.’” [The Island Packet, 4/21/2020]
Melba’s (Harlem, NY) “Melba Wilson has owned the restaurant Melba’s in Harlem since 2005. She applied for the PPP through her bank and never heard back. So she decided to go to a Community Development Financial Institution — not-for profit lenders known as CDFI’s — and was approved for a loan within days. ‘If I had not gone to a CDFI I would not have received the funding,’ Wilson said. ‘I would be like so many of my peers still waiting or being told no. There’s no doubt about it.’” [WNYC, 05/01/2020]
The Gingered Peach, (Lawrenceville, NJ). “Joanne Canady-Brown owns a bakery called The Gingered Peach in Lawrenceville, New Jersey. She first applied for the PPP loan through her bank and never heard back, so for the second round she’s applied through the credit card processing company Square. Her application hadn’t been approved as of Friday.” [NBC News, 04/29/2020]
Wolfpack Promotionals, (Minneapolis, MN). K.B. Brown, the owner of a black-owned print shop in North Minneapolis, was eager to take advantage of the small-business aid made available by lawmakers in response to the COVID crisis, but was unable after asking Wells Fargo, with whom he had done business for years. Brown said, “For a lot of the SBA stuff and other loans, you have to be ‘bankable,’” Brown said, “so if you couldn’t get a loan from the bank before, you’re just screwed. And many of us are in that position.” [Mother Jones, 4/24/2020]
Café Con Leche (Wappingers Falls, NY). “Phil Cordero is the owner of Wappingers Falls Puerto Rican restaurant Café Con Leche, a small local business forced to cut a majority of its staff due to the shutdown…’Several banks dropped the ball when this rolled out,’ said Cordero. ‘They weren’t ready for it; they weren’t ready for the flood of applications coming through.’…Cordero was left wondering why some small family-owned businesses like his were left behind.” [Spectrum News, 4/24/2020]
Las Delicias Taquería (Santa Clarita, CA). “Maribel Cabrera, who owns Las Delicias Taquería in Santa Clarita, was finally able to submit an application to Wells Fargo last Wednesday. But then on Thursday, she received an email saying the PPP had run out of money. She was unclear whether her application had been processed or not. ‘Do I get some? Or am I in limbo?’ she wondered.” [LAist, 4/20/2020]
Originate Natural Building Materials (Tuscon, AZ). “The first quarter of this year was the fourth busiest in Natasha Winnik’s 16 years of owning Originate Natural Building Materials…Winnik applied for the PPP and EIDL loans, but neither came through. Finding out many bigger chain operations got funding was ‘like a punch in the gut,’ she said. [Tuscon.com, 4/24/2020 updated 5/8]
The Funky Zebra (Fish Creek, WI). “Cindy DeWitt has been in business for 13 years running The Funky Zebra, a boutique in Fish Creek. DeWitt applied for a PPP loan, as well as additional SBA loans, on the first day the Paycheck Protection Program opened. ‘Haven’t heard one word. Not a word,’ DeWitt said. ‘Not only did I not get them, I haven’t heard a ‘We’re sorry, we ran out of money’ or anything. It’s frustrating for a small business like myself.’…’I think I’m going to end up going and taking a second mortgage out,’ DeWitt said. ‘I’ve jumped through all the hoops, and it didn’t do me any good.’” [Green Bay Press Gazette, 4/27/2020]
Pok Pok (Portland, OR). “Andy Ricker, the owner and chef of Thai restaurant chain Pok Pok, wrote that his loan application was on hold and that he and other small business owners had been ‘snookered by publicly traded companies who received millions and left independent small business in the gutter as the well ran dry.’” [Los Angeles Times, 4/18/2020]
Lawmakers understood that for many at-risk small businesses, it’s hard enough to secure a loan from a bank. When aid is disbursed in large part through private lenders with existing lending relationships with customers, it makes it that much harder for these businesses to survive. This is why lawmakers included specific provisions to ensure money went to high-need small businesses in the first place. The Trump administration, however, failed to provide guidance and instructions for these businesses to be prioritized and made it nearly impossible to identify important demographic data to enforce the law they were in charge of implementing, once again leaving chaos for many working family entrepreneurs in their wake.