NOTTINGHAM, MD—Maryland Attorney General Brian E. Frosh on Wednesday joined a coalition of 23 state attorneys general in calling for key changes to the Paycheck Protection Program (PPP) to ensure that funds are distributed fairly and equitably.
In a letter sent to Congressional leadership, the attorneys general express concern that the program, while helping some small businesses and their employees, suffered from a lack of transparency, technical savvy, and functionality that led to funds being distributed in a manner overly benefiting large companies. As a result, the attorneys general argue that both the first and second rounds of funding have left many small businesses across the country under-served by PPP.
“The Paycheck Protection Program was designed to help keep businesses afloat and support their employees,” said Attorney General Frosh. “”Instead, many small businesses were shut out because funds were drained by large corporations. Our struggling small businesses should have been at the front of the line, not left to fend for themselves.”
The coalition is calling for Congress to adopt the following measures before they allocate additional PPP funding:
- Increasing Fair Access Funding for Small Businesses: Require the Small Business Administration (SBA) to provide stronger, explicit guidance to lenders to ensure that funding goes to small businesses and not large, publicly traded companies. Additionally, the coalition urges Congress to adopt rules that prohibit lenders from giving preference to certain categories of customers over others, such as existing, larger customers, or customers whose current debts could create conflicts of interest for the lender.
- Ensuring Equitable Distribution: Allocate a portion of future funding exclusively to minority-owned small businesses, and that funding should be fairly distributed across metropolitan areas, and that small banks and credit unions should be fairly represented by as lending sources involved in the program. The coalition also calls for the SBA to create a simple and straightforward process for “unbanked” or “lesser-banked” small businesses or those that do not wish to apply through their current financial institution to receive funding.
- Better Communication and Transparency: Congress should direct the SBA to provide more direct guidance to businesses during the application process. The SBA should also be required to disclose more granular data on the percentage of loans in various size categories, the number and amount of loans processed by each lender, and the geographic distribution of all loans by metropolitan statistical area, borrower demographics, including gender, race, and ethnicity; and comprehensive data on the businesses that receive funding.
- More Flexibility and Technical Support: The attorneys general believe that the program does not adequately serve small businesses and requires more flexibility. The coalition calls for longer time limits for businesses looking to rehire employees, around repayment and forgiveness requirements to businesses that allocate a smaller amount of revenue to salaries, and expanding qualifications for loan forgiveness. They also urge Congress to provide the SBA with greater funding to improve technical support and mandate a uniform, user friendly process for use by lenders.
In addition to Maryland, the letter was signed by the attorneys general of California, Connecticut, Colorado, the District of Columbia, Delaware, Hawaii, Iowa, Illinois, Maine, Michigan, Minnesota, New Mexico, New York, Nevada, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington State, and Wisconsin.