Small Business Loan During The Pandemic – FILE – In this filing dated April 2, 2020, a foreclosure notice was posted on Great Frame Up in Grosse Pointe Woods, Michigan. President Donald Trump launched the Paycheck Protection Program to help the US economy recover quickly from the coronavirus. a disease that exists worldwide. President Joe Biden has prepared to try to direct more money to poor communities and minority-owned businesses. Now, almost two years after the program began, what are taxpayers getting $800 billion for? (AP Photo/Paul Sancia, file)
WASHINGTON (AP) — President Donald Trump launched the Paycheck Protection Program to help the U.S. economy recover quickly from the coronavirus pandemic, helping small businesses stay open and their workers employed. President Joe Biden has prepared to try to direct more money to poor communities and minority-owned businesses.
Small Business Loan During The Pandemic
Now, nearly two years after the program began, the question is what did taxpayers get for the $800 billion. The Biden administration says its reform of the program has helped prevent worsening racial inequality, while leading academic studies show the overall cost of saved jobs has been high and most of the benefits have gone to the wealthy.
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Nearly a year after deploying $1.9 billion for the coronavirus, the Biden administration says it has made major adjustments to the forgivable loan program, pointing to internal figures that show more benefits have gone to poor communities, young men and women. small businesses – those where the owner is the only worker.
“The administration came into office very focused on racial and social justice, and small businesses are a big part of that,” said Michael Negron, senior White House small business adviser. “For our purposes of equality, business is important because it helps create productive wealth.”
However, outside studies suggest that the program, known as PPP, has been cost-effective in terms of labor savings and that the payments have largely benefited business owners who were prepared to deal with the pandemic. Overall, the study suggests that 23% to 34% of PPP dollars went to potential job losses, at a cost of $258,000 in saved work.
The controversial views on PPPs are part of a wider debate about how to help economies in crisis. There are pressures to find the right amount of money as quickly as possible without increasing inequality or triggering other back-end mechanisms such as high inflation.
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Over two presidencies, Congress approved $5.8 trillion in relief spending that included new interventions like forgivable loans, direct payments and an expanded child tax credit that was deposited into people’s bank accounts each month.
When MIT economist David Autor analyzed PPP along with other economists, he saw a very bad tool. The US has not developed data systems to monitor what is happening in the payment of each business, unlike Canada, the Scandinavian region, Portugal and Brazil. Such systems would facilitate the allocation of funds based on actual demand during recessions. The US has not invested in its data resources and as a result has been unable to target aid.
“Instead, the US is ‘starving the beast,'” Autor said.
By changing the guidelines of the PPP program, the Biden administration was trying to prevent the pandemic from continuing to widen the nation’s wealth gap.
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Black Americans make up about 12% of the US population, but control only 2% of the assets that come from owning private businesses that remain key to economic growth, according to the Federal Reserve. Only 4.3% of total US household wealth belongs to black Americans and 2.5% to Hispanic Americans, significantly less than their share of the total US population.
When the Trump administration introduced PPP in 2020, the full effects of the pandemic were beginning to be felt in the economy. There was a rush to get money quickly due to the unpredictability of the situation, so loans went through the big banks who often had existing relationships with the right businesses to make a profit.
The program had bipartisan support, and then-Treasury Secretary Steven Mnuchin told a congressional committee in September 2020 that the payments would support 50 million jobs. While he wanted more aid, Mnuchin said the most important thing during the pandemic was to provide aid “quickly.”
The need for speed makes it difficult for historically disadvantaged groups to raise money. That’s why the Biden administration changed the guidelines and laws after taking office.
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It set a deadline of 14 days in February 2021 when only companies with fewer than 20 employees will be able to apply for PPP loans. It changed the way PPP loans are calculated so that sole proprietors, independent contractors and the self-employed can get financing that fits their needs. Most of the loans were directed to local financial institutions and minority shareholders.
As a result of this change, last year the PPP granted close to 2 million loans to companies in medium and low regions, 67% more than the previous year, according to figures provided by Administration officials. There were 6 million businesses with fewer than 20 employees that received loans, a 35% increase in the program during the Trump administration.
Because regulation focused on many businesses, including those where the owner was only an employee, the average size of PPP loans declined. It hit $42,500 last year, down significantly from $101,500 in 2020.
“We inherited a system from the previous administration that was full of inequality,” said Isabel Guzmán, head of the Small Business Administration.
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Meanwhile, an analysis by Autor and other economists said the distribution during the Biden administration “did not appear to be effective.” That is possible because the labor market started to recover in May 2020 even though the wave of contagion has subsided. As fewer jobs were at risk, fewer jobs needed to be saved.
Autotor estimates that the richest 20% of households receive about 85% of the program’s benefits. It’s possible that Biden’s changes made the PPP more equitable, but the proof won’t come until tax receipts come in in the coming years, he said.
“They tried to be better stewards of the process, which they had the luxury of doing because the problem wasn’t urgent,” Autor said. “It is not that the PPP did nothing; it has been a lifesaver for some small businesses and their lenders. It is also an incredibly large gift from future generations of American taxpayers “to profitable corporations.
This story corrects the name of the head of the Small Business Administration to Isabel Guzmán, not Juan Guzmán. Alloy Silverstein offers guidance to small businesses experiencing hardship and losses during the COVID-19 period. Now that New Jersey is a declared disaster state, this Small Business Administration (SBA) grant is available to New Jersey small businesses (fewer than 500 employees).
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Small business owners in every US state and territory. are now ready to apply for a low-interest loan due to the Coronavirus (COVID-19).
The SBA EIDL is a long-term, low-interest disaster loan offered as a quick and affordable method of financing for individuals and businesses to recover from declared disasters. The goal during the COVID-19 pandemic is to provide critical financial support to help small businesses overcome the temporary loss of income.
Loans are available to businesses of all sizes and nonprofits to pay outstanding debts, bills, accounts payable, and other bills that cannot be paid due to the impact of a disaster. It is also up to landlords and tenants to repair or replace property damaged by uninsured or underinsured catastrophes.
EIDLs provide assistance of up to $2 million payable over up to 30 years (determined on a case-by-case basis). The interest rate is 3.75% for small businesses without credit available elsewhere; companies with existing debt elsewhere are not eligible. The non-profit interest rate is 2.75%. Note that the SBA defers payments for 12 months.
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• Complete copies, including all schedules, of the applicant’s company’s most recent federal tax returns; explanation if not available.
• IRS Form 4506-T completed and signed by the applicant company, each principal owner of 20% or more of the applicant company, each general partner or managing member, and any owner with more than 50% ownership of the joint venture. (Partners include the parent company, subsidiaries and/or companies with common ownership or control).
• Personal Finance Statement (SBA Form 413) completed, signed and dated by the applicant (if a sole proprietor), each principal owner of 20% or more of the applicant’s business, each general partner or managing member.
• If the most recent federal income tax return is not submitted, the year-end income statement and balance sheet for the current fiscal year are acceptable.
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• Complete copies, including all attachments, of the most recent federal income tax returns of each principal owner of 20% or more of the applicant’s business, each general partner or managing member, and each member if any owner owns more than