When President Joe Biden announced changes to the paycheck protection program this week to bring more equitable relief to smaller and minority businesses, the benefits quickly made a difference to Barbara Wright.
Wright, a high school teacher whose side streak as a $ 30,000-a-year Lyft driver was stalled by the pandemic, learned Tuesday that she was now eligible for a forgivable PPP loan of $ 6,336 Has – an almost six-fold increase over the $ 1,085 she received from the program last year.
“I’m glad someone saw the light somewhere,” said Wright, 59, who lives in the Englewood neighborhood on Chicago’s South Side. “I’m not ungrateful, but the $ 1,000 didn’t go very far.”
The changes already increase loan amounts and forgiveness program participation in Chicago small businesses and sole proprietorships, many of whom were banned from the program last year. Taking a break from processing “bigger” small business applications can help get the ball rolling.
For two weeks from Wednesday, only companies with fewer than 20 employees can apply for PPP loans. This encourages banks to focus exclusively on the smallest businesses that were hardest hit during the pandemic.
In the first week of March, a revision of the funding formula for sole proprietorships, independent contractors, and the self-employed will bring more relief, with $ 1 billion earmarked for unemployed businesses in low and middle income areas.
According to the Small Business Administration, which launched the PPP in April as an economic bridge for businesses on Main Street during the COVID-19 pandemic, about 70% of non-employer businesses are owned by women and people of color .
Norma Sanders, director of special initiatives for Greater Auburn Gresham Development Corp., a community organization designed to help businesses access the funds, said the changes in the Biden administration could open the floodgates for previously disenfranchised minority-owned small businesses.
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“I think it will help,” said Sanders. “I think people will answer now that they know it is for them.”
Last year, the SBA approved 5.2 million outstanding loans worth $ 525 billion. However, the program came under fire after banks allegedly gave larger customers – including publicly traded companies – priority over smaller companies.
The federal government rebooted the PPP in January with an additional $ 284 billion and an increased focus on companies that were lagging behind during last year’s program.
Six weeks into the new round of funding, the SBA has approved more than $ 1.9 million total eligible PPP loans totaling $ 140 billion – nearly half of the allocated funds – with smaller average loan sizes and more diverse recipients.
In Illinois, the SBA approved more than $ 7.4 billion in PPP loans worth more than $ 7.4 billion in the first six weeks of the new funding round, the fifth largest of any state. The average loan size is approximately $ 67,000.
Wright, who is fighting breast cancer, teaches during the pandemic at CICS-Longwood, a charter school in the Washington Heights neighborhood of Chicago’s South Side. But her doctors told her to stop going to Lyft because of health risks when the pandemic hit last March.
She applied for a PPP loan as a Lyft driver and received $ 1,085 last summer through Seaway Self-Help Credit Union, a nonprofit community development financial institution. The loan was about $ 29,000 less than the annual income she lost.
Wright is struggling to make ends meet, has cut spending and has fallen back on her bills. The new $ 6,336 loan will help her catch up on her finances, she said.
But she remains somewhat cynical and frustrated with the inequality of PPP after Chicago-based sandwich chain Potbelly and other large publicly traded companies received $ 10 million in loans through the program last year.
“It was horrible. I didn’t get that,” Wright said. “You can put millions and billions of dollars into these big companies and then pretend you’re doing the common man a favor by giving them $ 1,000. “
The state announced last month it would invest $ 3.4 million in expanding public relations to help small and minority-owned businesses that were struggling to access last year’s PPP program.
Cara Bader, chief of staff for the Illinois Department of Commerce & Economic Opportunity, said community navigators – organizations that guide businesses through the application process – and other grassroots efforts helped reach 10,000 small businesses during the new round of funding.
“Part of the reason we doubled down on the Community Navigator approach with PPP was to make sure we can continue to reach the companies they are in and make those programs accessible in ways that we haven’t in the past that was the case for them, ”said Bader.
Getting to the stores is only half the battle.
Rebecca Shi, executive director of the Illinois Business Immigration Coalition, said the nonprofit successfully guided 200 paint owners through the PPP process last year with an average loan volume of $ 27,000. But three-quarters of the companies they contacted never processed the application, mostly because the payout wasn’t worth the effort, Shi said.
“There was just not enough enthusiasm to go through all of this document preparation and you only get $ 100,” Shi said.
A major revision to the funding formula will allow non-employer companies such as cleaning services, home repair companies and personal care products companies, many of which are minority owned, to use the gross income line on Appendix C of their tax returns, which could significantly increase their loan size.
Using the previous formula, many sole proprietorships qualified for $ 100 or less loans, with some in Illinois getting as little as $ 1.
Other changes made by the Biden administration include removing restrictions that prevent small business owners with previous fraud crime convictions or offenders defaulting on their federal student loans from getting credit.
“It will be day and night,” said Shi. “Our program staff are already getting questions and more interest.”
Attracting some minority small business owners can be challenging despite the potential for better results. Skepticism prevails in economically disadvantaged neighborhoods like Auburn Gresham, where the experience of applying for the first rounds of funding has discouraged many business owners, Sanders said.
“I think some of the concerns from our neighborhood were that they were applying and not necessarily getting information back from the big banks,” Sanders said.
Alpha Bruton, 65, an artist in the Bronzeville neighborhood of Chicago’s South Side, works as an advisor to the Sojourner Truth African Heritage Museum in Sacramento, California. In April, she received a $ 1,075 PPP loan through Seaway Self-Help Credit Union.
She applied for a second loan in January and learned Tuesday that she was eligible under the new rules for $ 3,393.
After Bruton received her first loan, she helped other artists guide through the process, but the small payouts and complicated application requirements put many of her peers off.
“Sometimes you bump into a wall with everything that goes into this application and people say, ‘I just don’t want it,” Bruton said.
Bruton said the new loan will go towards rent and hopefully help her get her summer when the Bronzeville Art District Trolley Tour returns and gives her a vehicle to sell her work on. Last summer the tour took place virtually.
Wright, of Englewood, said allocating more PPP funding to minority-owned small businesses will not only help keep them and other sole proprietors afloat until the pandemic has subsided, but will also help the hardest-hit communities where they live live and work, benefits directly.
“In our community, they’re going to put the money back into the economy right away,” Wright said. “Nobody will save this money, they will spend this money.”