Banking

Two years after PPP, small businesses still struggle to access capital

More than four in 10 small business owners doubt they would be able to cover an unexpected $5,000 expense, and entrepreneurs of color have even less confidence about their ability to navigate surprise costs.

That’s according to polling last month by Reimagine Main Street, a project of Public Private Strategies Institute that was launched in 2020 to address pandemic-related shutdowns.

The survey’s findings reflect the ongoing lack of access to capital that small businesses desperately need, Tammy Halevy, executive director of Reimagine Main Street, said Thursday during a virtual roundtable to discuss the results and solutions.

“The last two years have taken a tremendous toll on small businesses,” Halevy said during the hour-long event, which featured speakers from the U.S. Small Business Administration, Wells Fargo and PayPal. “We know that small businesses that don’t have a financial cushion or external source of funding remain at risk.”

Small businesses across the country were hit hard by pandemic-related shutdowns that began in the spring of 2020. The federal government provided relief in the form of forgivable Paycheck Protection Program loans and other emergency assistance, but some small businesses say they are still struggling in the face of inflation, hiring challenges and supply-chain disruptions.

On Thursday, a bill sponsored by Sen. Ben Cardin, D-Md., to provide an additional $48 billion to restaurants and other small businesses such as gyms that were hurt by the pandemic did not win enough Senate votes to proceed, according to Roll Call. The bill needed 60 votes to move forward, but it only managed to win 52.

The release of Reimagine Main Street’s survey was not tied to the Senate’s vote, Halevy said. The survey — which was conducted online from April 7-28 in collaboration with U.S. Black Chambers, the United States Hispanic Chamber of Commerce and the National Asian/Pacific Islander American Chamber of Commerce and Entrepreneurship — came out of a desire to understand access to capital and to find out who small businesses owners trust, Halevy said.

The survey captured the viewpoints of 2,570 respondents from all 50 states and Washington, D.C., including small business owners who are African American, Latino, white, Native American and Asian American/Pacific Islander.

The majority of respondents from all five groups applied for a loan or another form of credit in the past 12 months, and of those who did, 83% sought less than $250,000, according to the survey.

Black entrepreneurs reported some of the lowest levels of confidence. Only 11% of African American small business owners said they were certain they could cover a surprise $5,000 expense, while 7% said they were confident they could finance a contract and 8% said they would be able to finance a volume discount on goods.

The survey’s finding that more than 40% of small business owners doubt they would be able to cover an unexpected $5,000 expense mirrored similar results in polling of consumers by the Federal Reserve.  In late 2020, 36% of Americans said they would have trouble covering a $400 emergency expense.

Despite the somewhat pessimistic outlook on small business financing, the survey found one positive trend: An overwhelming majority of respondents know, like and trust the SBA.

Seventy-six percent of Black, white and Latino small business owners said they trust the SBA, while 81% of Asian American/Pacific Islander small business owners said the same.

That finding was unexpected, given Americans’ waning trust in the government, Halevy said.

But Patrick Kelley, associate administrator for the SBA’s Office of Capital Access, said he’s not surprised by respondents’ opinion of the agency, given the fact that the SBA has “touched probably one-third” of the nation’s 32.5 million small businesses over the past 24 months.

The SBA backed PPP loans, which Kelly said has led to increased awareness of the agency.

“When you originate or support a trillion dollars in assets over a roughly 14-month period, you will make a market splash,” Kelley said during Thursday’s roundtable.

The fact that so many entrepreneurs expressed trust in the SBA creates an opportunity to make more connections between small business owners and potential lenders, including fintechs, banks and community development financial institutions, said Martina Edwards, chief of strategic partnerships at Access to Capital for Entrepreneurs, a Georgia-based CDFI that has provided more than $140 million in loans and business advisory services.

“If the SBA has a bullhorn and a platform … there’s a unique opportunity to have them provide more information now about CDFIs because it’s coming from a trusted source,” Edwards said.



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