The current system is not working for small and micro businesses – as documented in the New York Times and other media. Yet recent studies show that many small businesses will be wiped out in a few months if current conditions continue.
I have been in contact with a number of small and micro businesses and all they have received so far is a hefty dose of frustration.
It appears to be working best for businesses with a prior and strong connection to a bank or lending institution.
Now the money for the SBA PPP program has run out and many have not heard back from the EIDL program.
The American Survey of Entrepreneurs, 2016, revealed that in Minnesota, only 22 percent financed their business through banks or financial lenders and only 3 percent through a government program.
Yet these two entities are leading the disaster recovery efforts.
Changes need to be made – and with new funding delivered the right way.
Here are some suggestions.
- There should be separate categories within the economic relief program for:
- Sectors most impacted by the Covid Crisis
- Small businesses with less than 20 employees
- Micro businesses with less than 5 employees and annual revenue less than $150,000
- Sole proprietor and independent contractors
- Applicants served by CDCs serving underrepresented groups
- Programs offered should have a simple application process and key requirements of the program be available in multiple languages.
- Lenders should be clearly identified in two categories
- Those accepting noncustomers and new clients with equal priority and adequate staffing
- Those accepting only existing customers
- Lenders should ensure their loan officers are properly trained on the new programs, are culturally intelligent to serve a diverse customer base, and treat every applicant with respect. They should post dashboards on applications received and processed so the public has some information on the process and outcomes.
- More products should be offered during this time when small businesses face both a drop in revenue as well low debt capacity. Programs needed are:
- Forgivable loans
- Lenders should partner with local CDCs especially CDCs serving underrepresented groups. Funding should be allocated to these CDCs to help with preparing application by small businesses they serve.
- Information of the programs should be available on a public dashboard with data disaggregated by business categories and sectors (above) and by race, ethnicity and gender.
It is time for state and local government to take the lead as national efforts are failing to reach those with the least power.
Send me your thoughts – email@example.com. And for sure connect with local and national policy leaders.