Who Lends to Small Businesses?

Diego ZuluagaThis question has gained new urgency as the federal government scrambles to bring emergency funding to millions of small businesses across the country under thePaycheck Protection Program (PPP). The PPP consists of forgivable loans that borrowers may use to cover employee payroll, rent, and utilities for eight weeks. The Small Business Administration (SBA)manages the PPP, but funds are allocated by authorized private lenders.Although the program ostensibly seeks to assist the smallest concerns in America, which cannot gain access to funding through other Fed and Treasury facilities, it came under strong criticism when it emerged that several rather large firms had benefited from it. Data from the SBA for itsfirst ($342 billion worth) round of PPP loans corroborate these anecdotes: 44 percent of loan volume consisted of loans of over $1 million and went to just four percent of (presumably the largest) applicants.The apparent inequity prompted public outrage, followed by a string of exculpatory press releases and stern official " clarifications " concerning eligibility for PPP loans. The public shaming seems to have hit a nerve: SBA data for part of round two lending, which will total $310 billion,show that loans under $150,000 accounted for 37 percent of volume, compared to just 17 percent in the first round. The average loan so far in round two is $79,000, against $206,000 for round one loans. Still, loans over $1 million represented 27 percent of total lending, ...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs