Meng Calls for Improvements to Key Loan Programs Designed to Help Small Businesses Impacted by COVID-19
May 14, 2020
Congresswoman sends letter to Treasury Secretary and SBA Head urging them to make the initiatives more effective in assisting businesses
QUEENS, NY – U.S. Rep. Grace Meng (D-Queens) announced today that she sent a letter to U.S. Treasury Secretary Steven Mnuchin and Small Business Administrator Jovita Carranza urging them to support and implement improvements to the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program, two critical initiatives intended to aid small businesses during the COVID-19 crisis.
Meng’s correspondence calls for fair treatment of PPP applications, ensuring the participation of women- and minority-owned businesses in both programs, providing improved data on businesses receiving assistance, waiving the EIDL program’s six month waiting period for denied applicants to reapply, and extending the eight week period for PPP loans.
“Small businesses play a critical role in our City’s neighborhoods and communities, providing jobs and critical services to New Yorkers,” said Meng. “Relief programs to assist these businesses must be more effective as we continue our fight against the coronavirus. Treasury Secretary Mnuchin and SBA Administrator Carranza must do more to improve the Paycheck Protection and Economic Injury Disaster Loan programs so that they work better for small business owners. We must do everything possible to help small businesses survive this global health crisis, and that includes making sure these two initiatives are truly helping entrepreneurs.”
The Coronavirus Relief, Aid, and Economic Security Act, H.R. 748 created PPP which provides forgivable loans to small businesses provided that 75 percent of the loan is used to keep employees on payroll. The remaining 25 percent could be used for rent, utilities, or mortgage interest.
The EIDL program provides low-interest loans to small businesses after a presidential disaster declaration is made. Those loans are designed to provide small businesses with operating funds until those businesses recover. In March, Meng introduced legislation with Reps. Velázquez and Chu that expanded the EIDL program to help small businesses suffering economic harm due to COVID-19, which became law as part of the first coronavirus relief package.
SBA manages both programs while the U.S. Department of the Treasury provides support regarding implementation. Because of the enormous economic harm caused by COVID-19, both programs struggled to keep up with demand, and controversy arose over claims of large banks prioritizing larger clientele over small businesses.
A copy of Meng’s correspondence can be found here, and the text is below.
Dear Secretary Mnuchin and Administrator Carranza:
I write on behalf of small businesses in Queens affected by the novel coronavirus (COVID-19) pandemic emergency. As a representative of Queens which is at the epicenter of the epicenter of this public health crisis, I urge you both to ensure the Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP) are supporting small businesses.
As you know, the Small Business Administration’s EIDL program and PPP are critical programs to ensure small businesses stay afloat as millions of Americans shelter at home. Because of the public health emergency, small businesses’ financial flows have been severely disrupted, which has created a cascading effect impeding their ability to pay utilities, rent, vendors, taxes, and their employees. Failure to save small businesses will have long-term socio-economic consequences that will likely take lifetimes to remedy.
Unfortunately, both programs have struggled to keep up with the overwhelming demand from small businesses. From technical issues with accessing disaster loans to lenders’ difficulties with submitting PPP loan applications to SBA – the challenges are enormous. It has also been reported that major banks have favored wealthy clientele over small businesses. Additionally, women- and minority-owned small businesses are at great risk of being shut out from receiving aid from either program because they did not qualify, did not have an existing relationship with the larger banks, or funds were depleted from both program accounts. In fact, it has been reported that at least 90 percent of businesses owned by minorities will not participate in PPP because of these issues. No doubt, you both recognize the problems small businesses are facing, and I urge you to support or take action on the following:
• Ensure the largest lenders prioritize small businesses’ Paycheck Protection Program applications, not just wealthy clients.
• Ensure women- and minority-owned small businesses can participate in both loan programs.
• Provide granular data broken down by congressional district, size of business, demographics of business owner(s), type of industry, number of employees, and annual revenue on who has received an EIDL and PPP loan.
• Waive the six-month waiting period to re-apply for an Economic Injury Disaster Loan (EIDL); currently applicants denied an EIDL must wait for that period.
• Extend the 8-week period for PPP loans. Currently, small businesses must use PPP within that period to have the loan forgiven. As states determine when to lift their stay at home orders, it is unclear if business will return to normal. Extension of the loan’s requirement to spend all funds within 8 weeks would benefit small businesses’ financial planning.
Thank you for your attention to this matter. I look forward to your prompt responses.