SBA should Report Who gets PPP Funds

If you are trying to figure out how many small, women or minority businesses got assistance through the Payroll Protection Program (PPP), you are wasting your time. The closest you can get to an answer is data on the asset size of banks or organizations that made loans. This is insufficient.

In the second PPP iteration, the government channeled more money to smaller lending institutions because they are more likely to lend to smaller businesses. No one disputes this. But it is an absurd way of accounting to the American public for 4.3 million PPP loans totaling $513 billion.

The Small Business Administration (SBA) dates back to the Great Depression and World War II. Then, Congress was concerned about ensuring businesses of all sizes participated in contracts to finance the war effort and reconstructed the economy. In 1953, Congress passed the Small Business Act (P.L. 83-163). It authorized SBA to promote the interest of small businesses by enhancing their competitiveness for government awards.

In recent decades, SBA created numerous lending, contracting, and entrepreneurial assistance programs to achieve its mission, e.g the 7 (a) Loan Guarantee Program, the Microloan Program, and Disaster Loan Programs. Congress also authorized it to assist small businesses in competing for government procurement awards. SBA does this by setting small business goals that prime contractors should aspire to meet if they receive government contracts above a certain amount. In addition, there are specialized programs for Veteran-Owned Small Businesses, Service-Disabled Veteran-Owned Small businesses, Small Disadvantaged Businesses, and Women-Owned Small Businesses.

Logic suggests why Congress wants SBA to operate these specialized small business programs. Before COVID, small businesses employed 58.9 million workers, or 47.5% of the US workforce. Among all small companies, those with fewer than 100 workers accounted for the largest share of small business employment. More importantly, businesses with 20 or fewer workers were responsible for the most significant net gain in the total employment. In contrast, large corporations were downsizing. Therefore, what sense does it make to allow giant corporations, or larger small businesses, to gobble up all government contracts – simply because they have the economies of scale to do so?

At the time of the COVID shutdown, there were 30.2 million small businesses. Of that number, slightly over 5 million had one or more full-time employees. Women entrepreneurs owned 21% of the employer-based small businesses and provided jobs for 15.9% of the small business workforce. Minority entrepreneurs owned 19.8% of small employer-based businesses and employed 14.8% of the total small business workforce.

Given these facts, the relevant question is, why is SBA not tracking how much PPP goes to businesses of various employment sizes, women-owned firms, or minority-owned businesses? This lapse is inexcusable, especially given the mission of SBA. Ironically, the PPP application requires firms to list their employment size.  However, that information is not include on PPP reports of SBA.

SBA must gather and report detailed PPP data. Congress needs it to exercise appropriate oversight and the public needs it to know where its tax dollars are going. COVID is a life-changing pandemic. But, the urgency of addressing the crisis does not absorb SBA of its fundamental responsibility. Firm employment size is already on the PPP application form. Race, ethnicity, and gender information could be collected easily by adding a line to the application. However, obtaining the data is one thing; reporting it out is another.

About Thomas_Danny_Boston 23 Articles
Danny Boston is an economist, writer, and entrepreneur. He is professor emeritus of Economics and International Affairs at Georgia Tech and for 25 years served as CEO of EuQuant, an economic research company. Today, Danny publishes the blog GazelleIndex.