PPP changes helping small minority-owned businesses land loans: ‘I’m glad somebody saw the light’

When President Joe Biden announced changes this week to the Paycheck Protection Program designed to provide more equitable relief to smaller and minority-owned businesses, the benefits quickly made a difference for Barbara Wright.

A high school teacher whose $30,000-a-year side gig as a Lyft driver was stalled by the pandemic, Wright learned Tuesday she was now eligible for a $6,336 forgivable PPP loan — a nearly sixfold increase over the $1,085 she received through the program last year.

“I’m glad somebody 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 are already boosting loan amounts and participation in the forgivable loan program among Chicago’s minority-owned small businesses and sole proprietors, many of whom were shut out by the program last year. A pause in processing “larger” small-business applications may help get the ball rolling.

For two weeks beginning Wednesday, only businesses with fewer than 20 employees can apply for PPP loans, encouraging banks to focus exclusively on the smallest businesses, which have been some of the hardest hit during the pandemic.

During the first week of March, a revision of the funding formula for sole proprietors, independent contractors and self-employed people will offer more relief, with $1 billion set aside for businesses without employees in low- and moderate-income areas.

About 70% of nonemployer firms are owned by women and people of color, according to the Small Business Administration, which launched the PPP in April as an economic bridge for struggling Main Street businesses during the COVID-19 pandemic.

Norma Sanders, director of special initiatives for the Greater Auburn Gresham Development Corp., a community organization enlisted to help businesses access the funds, said the Biden administration changes may open the floodgates to previously disenfranchised minority-owned small businesses.

“I think it will help,” Sanders said. “I think people will respond now that they know it’s for them.”

Last year, the SBA approved 5.2 million forgivable loans worth $525 billion, but the program came under fire after banks allegedly prioritized larger clients — including publicly traded companies — ahead of smaller businesses.

The federal government relaunched the PPP in January with another $284 billion in funding and an increased focus on businesses left behind during last year’s program.

Six weeks into the new funding round, the SBA has approved more than 1.9 million forgivable PPP loans totaling $140 billion — nearly half of the funding allocated — with smaller average loan sizes and more diverse recipients.

In Illinois, the SBA has approved 110,510 PPP loans worth more than $7.4 billion through the first six weeks of the new funding round — the fifth largest total of any state. The average loan size is about $67,000.

Wright, who is battling breast cancer, is teaching remotely during the pandemic at CICS-Longwood, a charter school in the Washington Heights neighborhood on Chicago’s South Side. But her doctors told her to stop driving for Lyft when the pandemic hit last March, due to health risks.

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 short of the annual income she was losing.

Struggling to make ends meet, Wright has cut back on expenses and fallen behind 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 over the inequity of the PPP after seeing Chicago-based sandwich chain Potbelly and other large, publicly traded corporations get $10 million loans through the program last year.

“It was awful. I didn’t understand that,” Wright said. “They can put millions and millions of dollars into these big corporations, then act like they’re doing the everyday person a favor by giving them $1,000.”

The state announced last month it would invest $3.4 million to expand community outreach to help small and minority-owned businesses that struggled to access last year’s PPP program.

Cara Bader, chief of staff at the Illinois Department of Commerce & Economic Opportunity, said community navigators — organizations that steer businesses through the application process — and other grassroots efforts have helped to reach 10,000 small businesses during the new round of funding.

“Part of the reason why we doubled down on the community navigator approach with PPP was to make sure that we could continue to reach businesses where they’re at, and make these programs accessible in a way that in the past, they have not been for them,” Bader said.

Reaching the businesses is only half the battle.

Rebecca Shi, executive director of the Illinois Business Immigration Coalition, said the nonprofit organization successfully guided 200 business owners of color through the PPP process last year, with an average loan size of $27,000. But three-fourths of the businesses they contacted never followed through with the application, mostly because the payout wasn’t worth the trouble, Shi said.

“There was just not that sense of enthusiasm to go through all that document preparation and you only get $100,” Shi said.

A key revision of the funding formula will allow nonemployer firms such as cleaning services, home repair contractors and personal care businesses, many of which are minority-owned, to use the gross income line on Schedule C of their tax returns, which could substantially increase their loan size.

Under the previous formula, many sole proprietors qualified for loans of $100 or less, with some in Illinois receiving as little as $1.

Other changes by the Biden administration include eliminating restrictions that prevent small-business owners with prior nonfraud felony convictions or who are delinquent on their federal student loans from receiving a loan.

“It will be night and day,” Shi said. “Our program staffers are already getting questions and more interest.”

Winning over some minority small-business owners may be challenging, despite the potential for more favorable outcomes. Skepticism abounds in economically disadvantaged neighborhoods such as Auburn Gresham, where the experience of applying for the initial funding rounds left many business owners discouraged, Sanders said.

“I think some of the concerns that our neighborhood had was that they were applying and they weren’t necessarily getting any information back from the big banks,” Sanders said.

Alpha Bruton, 65, an artist in the Bronzeville neighborhood on Chicago’s South Side, works as a consultant 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 she will be eligible for $3,393 under the new rules.

After receiving her first loan, Bruton helped guide other artists through the process, but the small payouts and complicated application requirements deterred many of her colleagues.

“Sometimes you hit a wall with all the stuff that goes into that application that makes people say, ‘I just don’t want to do it,’” Bruton said.

Bruton said the new loan will go toward rent and hopefully help get her to the summer, when the Bronzeville Art District Trolley Tour returns, giving her a vehicle to sell her work. Last summer, the tour was held virtually.

Wright, of Englewood, said allocating more PPP funding to minority-owned small businesses will not only help her and other sole proprietors stay afloat until the pandemic subsides, it will directly benefit the hard-hit communities where they live and work.

“In our community, they’re going to put the money back into the economy right away,” Wright said. “Nobody is going to save that money, they’re going to spend that money.”