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Washington, D.C. April 13, 2020 — Due to the coronavirus pandemic, a staggering number of small businesses are at risk of failing. A new analysis from the Center for American Progress looks at the weaknesses of one of the main programs Congress created to save them: the Paycheck Protection Program (PPP).

The analysis finds that the PPP is unlikely to reach millions of the smallest businesses in need, a disproportionate share of which are owned by people of color and women. The smallest businesses may not have preexisting lines of credit, credit cards with a bank, or the financial expertise or capacity of large businesses to push their credit applications through the pipeline quickly.

The CAP analysis recommends making several changes to the PPP in order to save thousands of small businesses and the tens of millions of jobs they support:

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  • Provide cash advances for PPP: Congress should allow businesses applying for the PPP program to qualify for cash advances and allocate $100 billion or more to fund these cash advances.
  • Target funding for businesses owned by people of color and women: Congress should dramatically expand community development financial institutions (CDFIs) and minority depository institutions.
  • Reboot support for state small business credit initiatives, community banks, and credit unions: Congress should restart two helpful small business programs that came out of the 2008 financial crisis: the State Small Business Credit Initiative and the Small Business Lending Fund.
  • Expand credit union loan caps: Congress should consider temporarily permitting credit unions to make small business loans during the COVID-19 crisis without otherwise counting them toward their member business lending cap.
  • Place a moratorium on small business mortgage and rent, debt payments, and utilities: Many small businesses are laying off employees to meet these recurring expenses while they wait for their PPP relief to come through. Creditors, landlords, and lenders who are harmed by the moratorium can be compensated in subsequent recovery bills.
  • Require congressional oversight of COVID-19-related SBA loans: Detailed SBA reporting requirements would ensure that the PPP program is operating well while also offering lessons for responding to future disasters.
  • Create a new National Business Interruption Risk Insurance program: With pandemics likely to become more frequent due to climate change, Congress should help prevent future ones from being so disruptive by creating a new risk insurance program now.

“Small businesses are not a small part of the economy; those that are already at risk employ 50 million Americans and, due to their size, are especially vulnerable to failing as a result of the coronavirus pandemic,” said Andy Green, managing director of Economic Policy at the Center for American Progress and co-author of the analysis. “The Coronavirus Aid, Relief, and Economic Security (CARES) Act did not do enough to quickly help small businesses and save jobs, particularly in underserved areas. Congress needs to act quickly to allow these businesses to access the money they need to stay afloat and save jobs.”

Read the column: “How Congress Can Help Small Businesses Weather the Coronavirus Pandemic” by Alexandra Thornton and Andy Green

To find the latest CAP resources on the coronavirus, visit our coronavirus resource page.