Program should be helping small businesses during COVID-19 pandemic, but minimum loan amount is too high
by Brandon Brooks
For New Pittsburgh Courier
The economy is reopening in most cities across America, we’re seeing more cars on the road, people at ice cream shops and employees returning back to work. For better or worse we’re attempting to reinvigorate our economy to avoid an absolute collapse the likes we haven’t seen since The Great Depression.
America’s economy relies on one sector more than any other, and coincidentally, it was one of the hardest-hit sectors from the COVID-19 pandemic—small businesses.
Small Businesses employ almost 60 million Americans, which equates to almost 50 percent of the U.S workforce, which is why it’s not hard to see why small businesses are the backbone of our economy. Yet, the relief programs set out for small businesses from the federal government have been mired in controversy from day one. All starting with the much- maligned Paycheck Protection Program (PPP), which saw large corporations, including many publicly-traded companies, taking money from the funds set aside for small business owners. So far we’ve seen two rounds of PPP totaling $659 billion, a first round of $349 billion followed by a second round of $310 billion. The second round ended up being a little more small-business friendly once the kinks were worked out and the Treasury Department made clear this funding was meant for those who did not have easy access to other forms of funding, and threatened harsh penalties for those who took the funds outside of “good faith.”
One thing most small businesses and economists can agree on, however, is that PPP was not enough. Luckily this was not the only program rolled out by the Feds to provide relief. They’ve also announced the Main Street Lending Program. The Main Street Lending Program is a $600 billion, one round fund to provide relief for, as the name implies… Main Street Businesses.
I understand not everyone may know what a Main Street business is, so I’ll give a quick breakdown. A Main Street business is a pillar of your community, such as a salon, barbershop, local auto body shop, indie retailer or locally-owned grocery store. They are the businesses we frequent within our communities most often and unfortunately these are some of the hardest hit from the economic shutdown due to COVID-19. So it makes sense why we would want to provide relief for these businesses as they are some of the mainstays of our communities and truthfully, the lifeline of our communities.
Yet, there’s a problem, a big one. The minimum loan amount a business could take out from the Main Street Lending Program is $500,000.
There is no small business, Main Street business that I can think of that would need a $500,000 loan right now. Most wouldn’t want to take on that much debt due to all the economic uncertainty and even during the best of times would be hesitant with $500,000 in debt. Many small businesses, especially minority-owned small businesses, are in a place of vulnerability…PPP was far from a success and unfortunately a majority of minority businesses were left out for various reasons. The Main Street Lending Program has an opportunity to be the lifeline that many small business owners need to get through the economic shutdown and hopefully thrive through the reopening, but unless we see some fundamental changes in the parameters, it’ll go down as a bigger failure than PPP was.
This program is not a forgivable loan or a grant, it is a loan…no matter what amount your loan ends up being, it will need paid back. Banks will be taking on some risk surrounding this loan, unlike the PPP, which was fully backed by the federal government. This means that not all financial institutions will be offering a loan via the Main Street Lending Program. Right now, I couldn’t, in good faith, recommend this as an option to small business owners, but with some changes to the parameters and some pressure by Congress I do believe this is a program that could provide strong economic relief and offer all of us a chance to recover the economy we all know and love.
I have been on the frontline of this situation from day one. Prior to the pandemic, I’ve been a small business advocate. Someone who’s always believed in the power of small businesses and communities working together to help build and sustain them. Through my work with Inventrify, we’ve helped countless small businesses across the country start and grow their operations the ensure their success. Being Pittsburgh-born and raised makes this place hold a special place in my heart, and I look forward to working with all who want to see small businesses succeed within our communities.
(Brandon Brooks, 30, graduated from West Allegheny High School in 2007, and is the owner of Inventrify, a crowdfunding platform for small businesses/startups to raise capital, equity-free.)