The current Paycheck Protection Program is set to expire in a few weeks. Many Black-owned businesses have been unable to apply for the program's second round because of unforgiven loans. Gusto's Chief Operating Officer Lexi Reese joined CBSN to discuss.
TANYA RIVERO: The current Paycheck Protection Program is set to expire in a few weeks. The program is designed to help small businesses cover their near-term operating expenses. It also provides an incentive for employers to retain workers and keep them on payroll. Despite the help, many business owners are still facing uncertainty.
Some have been unable to apply for the second round of PPP because of unforgiven loans. Black-owned businesses bear the brunt of this. According to Gusto, 75% have not had their loan forgiven. That is compared to 56% of white business owners. Ninety-six percent of black-owned businesses are also sole proprietors, or business owned and operated by one person, which can create even more obstacles.
For more on this, I want to bring in Lexi Reese. She Is chief operating officer of Gusto, a platform used by more than 100,000 small businesses to facilitate their payroll, benefits, and HR needs.
Hi, Lexi. Thank you for joining us. Great to see you. So, many minority business owners are facing huge challenges. What needs to be done for them to access this aid?
LEXI REESE: Yeah. Thanks for having us, Tanya. So just as context, Gusto helps pay and provide health insurance, as well as financial benefits, to millions of individuals, among the 60 million that work for small businesses. So from tech startups to flower shops, and everything in between, we serve small businesses. We know these businesses well. And we're super excited about the stimulus package passed this weekend. But it still falls short of what small businesses need.
And I think the main myth to bust is this notion, that because over 40% of Paycheck Protection Plan funds are still unallotted, which means small businesses aren't grabbing these funds, there's a myth that they don't need them. That's not true. As important as the quantity of funds that are available is the quality of how we roll this out to small businesses, to make it truly accessible. And there are several adjustments that need to be made, so that it has the intended impact that you said at the beginning, which is how do we keep these businesses in business and how do we keep their workers employed.
TANYA RIVERO: So what are those adjustments that need to be made?
LEXI REESE: Four adjustments, totally doable. But logistically they have to be done. One is extend the application date. The application date is still March 31st. It's March 9th right now. Nearly 60% of the PPP funds from the last package, and this one, are still available. We want small businesses to be able to apply for them. But when the paperwork is so onerous and the rules keep changing, we just need to extend that timeline. Change number one.
Change number two is adjusting the eligibility requirements. Two adjustments that need to be made. One is what is so critical, is that we take operating costs into account. Many businesses right now are penalized, because as it is related into the eligibility requirements, their gross revenue looks positive. But their actual net revenue, factoring in the changes to their business model that they've incurred as a result of adjusting to COVID, if you look at their net revenue, it looks much different.
So take Silver Branch Brewing in Maryland. They changed from an on-premise taproom to a place that shares canned beer. Their canning costs have gone way up. That's so much different than operating a taproom. And so if you look at their top line, it looks like they don't need aid. But when you factor in those operating costs, you see very clearly that they do.
The other eligibility requirement, and this is really important, we just surveyed over a thousand female small businesses, and 47% of new businesses started during the pandemic were started by women who are Black, Indigenous, or people of color. So one business owner is [? Ashley ?] [? Ordonez. ?] She's a mom who sold her dream home and her wedding ring to start a salon business. And she started her business after February 15th, 2020, which is the cutoff for eligibility to PPP. And that needs to be changed, because [? Ashley ?] is exactly the type of business that will help communities thrive.
So change the application date, change the eligibility requirements. Two other changes, enforce loan forgiveness. You said at the outset, currently 75% of Black business owners have not had their first round of PPP forgiven, compared to 56% of white business owners. So the key part of Paycheck Protection Plan was that the terms that folks were borrowing on were favorable to the borrower, because we were trying to keep businesses in business and keep American workers employed.
The terms are really easy to know. If you're on Gusto, you can tell whether employee and compensation levels are maintained, and whether the loan proceeds were spent on payroll costs. Those are the only two requirements that need to be met to have your loan forgiven. And the fact that so many people are still waiting with that debt hanging over their head, to be forgiven, is unacceptable.
So finally, last change is help women by investing, not just in restaurants and bars-- there was $25 billion in this most recent stimulus allocated to restaurant and bars-- but also in retail. Retail is predominantly owned by women. It has been equally hard hit by this pandemic, and there are so many stories of great business owners who need this aid as well. And giving that aid back will help our communities thrive.
TANYA RIVERO: All right. Great suggestions. Well, Lexi Reese, thank you so much for your insight. We appreciate having you on.
LEXI REESE: Thank you, Tanya.