With Growth In Mind, Congress Must Be More Small-Business Inclusive

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Congress is grappling with how to support struggling businesses across our nation. The novel coronavirus has flipped the American way of life on its head, and now record numbers of unemployed are unsure of how they will make ends meet.


To quell fears of a plummeting economy, Congress, in partnership with the Small Business Association (SBA) and Treasury, cobbled together the Payroll Protection Program (PPP) to get money to businesses that need help most and prevent additional job losses. But after launch and mounting confusion, Congress’ latest effort to support America’s struggling businesses may, in fact, have missed the mark.


This week, House Democrats unveiled the Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act, their proposal for the next phase of coronavirus relief. The nearly $3 trillion piece of legislation would provide much needed financial assistance to state and local governments, provide hazard pay for frontline workers, increase funding for coronavirus testing and most importantly, from small business and consumer standpoint, expand small business PPP eligibility for hospitals, nonprofits and local news outlets.


While this PPP eligibility expansion is a step in the right direction, we are concerned again it might miss some eligible and critically important businesses. At a time when we are seeing record unemployment numbers, the PPP needs to be about saving as many American jobs and businesses as possible.


Small businesses and entrepreneurship are the backbone of the American spirit and economy, creating over 1.9 million new jobs in 2015 alone. Developing innovative solutions and meeting gaps in consumer demand are driving factors in this market sector’s success. And it comes as no surprise that keeping new businesses afloat requires a steady stream of funds. Unfortunately, the current pandemic has devastated the economy and crippled many businesses.  


The PPP was initially created to preserve jobs and provide needed funding to these struggling businesses, but the way it was unraveled opened the door for to lack of clarity and confusion.Congress awarded the SBA and Treasury broad authority to ensure funds were swiftly dealt to American businesses. But this broad authority has allowed them to pick market winners and losers with the implementation of the “affiliation rule.” This groups together businesses that share common investors into one entity, ultimately putting them above the 500-employee threshold. In reality, many otherwise eligible companies have fewer than 500 employees but the “affiliation rule” makes them ineligible for support under PPP. 


House Speaker Nancy Pelosi rightfully brought attention to the fact that many small businesses under 500 employees have equity investors and should still qualify for PPP funds. Speaker Pelosi specifically noted, “access to forgivable PPP loans [for these types of startups] will be critical to preserving jobs during the coronavirus pandemic and to securing America’s leadership in science, technology and innovation.” Sadly the Treasury has ignored this advice and bullied venture-backed companies into giving their loans back.

Since March 11, almost 46,000 startup employees have been furloughed and only 23% of startups have current commitments from investors to provide additional capital. Most of these companies are focused on developing cutting-edge technology and shifting their resources to manufacture essential items to address public health and safety issues tied to the COVID-19 pandemic.

Withholding desperately needed funding from these firms could hinder innovation and leave consumers with diminished choices. We’ve already seen empty shelves at the grocery stores due to disruptions in supply chains. But we’ve also seen the admirable work of many companies stepping up to develop personal protective equipment and other COVID-related goods backed by federal funding. We think Congress should support small businesses and startups by being more inclusive in the criteria if these firms are delivering critical goods during this difficult time.

Sally Greenberg is the director of National Consumers League.

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