How Philly is working to perfect the Payroll Protection Program (PPP)

The Virus and the City: Can Philly Perfect PPP?

Drexel'due south Metro Finance Lab director and the Enterprise Center's Della Clark on organizing locally to relieve minority-owned businesses

Dec. 22, 2020

Afterward months of inaction, Congress has finally passed a relief packet. Afterwards seemingly endless eleventh-hour machinations, the final bill contained very few surprises when it came to its $325 billion of small business relief: $284 billion defended to the Paycheck Protection Programme (PPP), with numerous gear up-asides; $20 billion to Economic Injury Disaster Loan (EIDL) advances; $15 billion to emergency grants to event venues; and $6 billion to a diverseness of other modest business programs.

This is much needed relief and nosotros are glad it finally passed. Still, despite all the media attention given to Congress' near midnight deed, and President Trump's dismissal of the neb, the strength of local networks volition determine its total success.

Philadelphia is pioneering a networked effort to reach vulnerable businesses that can serve as a blueprint for the nation

In the first circular of PPP, unbanked and underbanked businesses, which are disproportionately Black- and brown-owned, were less likely to participate, given the program's reliance on the mainstream banking organization. Many of these concern owners, and the families and employees they support, have needlessly suffered as a result of pattern issues in distributing the first round of PPP. Nosotros cannot repeat this mistake.

The Enterprise Center program aims to serve as a lifeline for at to the lowest degree five,000 Blackness- and brown-endemic business concern owners to consummate their PPP applications.

The Enterprise Heart in Philadelphia (run by one of the authors) saw this challenge coming a month ago. In response, they got organized and created a program to build support for and distribution channels to Black and chocolate-brown entrepreneurs. This program should be used as a national model for fairly distributing PPP relief. Through The Enterprise Center, Philadelphia has a chance to pb the nation in modeling both how to prepare small-scale businesses for the PPP besides as coordinate business organization support and capital letter admission over the long haul.

The Claiming of PPP: Who gets coin when?

Even with Congressional revisions, ensuring that PPP reaches disadvantaged businesses in a timely manner ultimately falls to local stakeholders.

To sympathize this, it's important to review what's included in the latest circular of the PPP. This bill opened up a window for $284.45 billion in second-draw forgivable PPP loans. It's estimated that this money volition offset to exist distributed as-early-as New year's day's 24-hour interval and the distribution window volition be open until the cease of March 2021.

In addition to opening up the spigot of PPP funds, congress made a few tweaks to the initial program design. They antiseptic forgivability terms, allowing up-to-40 percent of expenses to be used for eligible, non-payroll costs. They lowered the cap for maximum loans, a $two million maximum loan, down from $x meg.

Finally, much to the ire of businesses operating at reduced chapters, they maintained the payroll focus for loan qualification (but with key modifications): businesses with fewer than 300 employees may infringe upwardly to 2.5x their average monthly payroll costs and 3.5x if they are in adaptation and food service, the hardest striking sector.

Congress sought to address distributional problems in the before rounds of PPP by establishing a serial of set-asides for the most disadvantaged businesses and lenders. Near notably the relief package created two types of ready asides:

1. Borrower ready asides. These are two set-asides for small businesses borrowers with 10 or fewer employees and businesses located in Low to Moderate Income (LMI) areas applying for loans up to $250,000: a $15 billion fix-aside for first-time PPP borrowers; and a $25 billion fix-aside for second PPP loans.
2. Lender set asides. These are 2 set up asides for community lenders that were established in the second round of PPP and funded once more with this round: $xv billion for modest customs banks, minor credit unions, and minor agricultural credit institutions; and $15 billion for mission-based customs lenders similar community development financial institutions (CDFIs), certified development companies (CDCs), minority depository institutions (MDIs), and SBA Microloan intermediaries.

These set asides for the smallest businesses and community lenders volition undoubtedly help spur a fairer distribution, and a $70 billion carve-out from the whole PPP is certainly a significant fix aside (it is over three times what the SBA lent through the mainstay seven (a) guarantee programme last year).

Only, the ability for this money to take an affect will largely exist determined past the strength of local community finance infrastructure and small business organisation ecosystems, which vary widely across the state.

In the cease, the ability to reach the most vulnerable businesses requires a new minor business ecosystem––1 that gives disadvantaged businesses the financial navigation they need from a closely knit network of concern back up organizations, back office providers and banks and lenders.

Philadelphia is an emerging model for how to do this well.

The Enterprise Middle's PPP Prep Program

Late in November, The Enterprise Middle began having conversations that foretold the distributional bug of PPP on the horizon. In response, they started to organize and prepare a plan to ensure the relief reached Black and brown business owners. Their plan, and the ensuing plan––PPP Prep––is an example of how to ensure this round of PPP is fairer than the first.

The Payroll Protection Program PREP (PPP PREP) is a collaborative initiative among local chambers of commerce, concern service providers, CDFIs, banks, and funders to provide PPP training services to Philadelphia small businesses to get them ready for stimulus dollars. PPP PREP will focus on outreach to support the businesses who missed previous rounds of PPP loans.

Many Black and brownish business owners, and the families and employees they back up, accept needlessly suffered as a result of pattern problems in distributing the get-go round of PPP. We cannot echo this fault.

The program aims to serve equally a lifeline for at least v,000 Black- and brown- owned concern owners complete their PPP applications. It will help them get their paperwork ready now, so they can employ early for PPP funds and stay open. In Philadelphia it has the potential to help Black- and brown-owned businesses admission $one billion of forgivable loans.

Mighty as it is, The Enterprise Center cannot do this momentous task alone; we all demand to assistance Black- and chocolate-brown-endemic businesses become their PPP paperwork prepare now.

Fortunately, the way PPP PREP functions is elegantly straightforward and tin can be hands replicated

The Enterprise Center has leveraged its touch by partnering with the Asian American Bedroom of Commerce of Greater Philadelphia, The Urban League, and African American Sleeping room of Commerce PA, NJ, DE; and the Greater Philadelphia Hispanic Bedchamber of Commerce. Each group has reached out to their constituencies with a five-step procedure for getting Blackness- and brown-endemic businesses prepared for PPP:

1. Fill out an intake course to receive the latest updates and make an appointment for virtual awarding aid.
2. Consult an accountant or bookkeeper to prepare 2022 and 2022 financial statements every bit soon as possible to make sure they are in good gild.
3. Review required document checklists that were released prior to previous rounds of PPP (this one will likely require like documents).
4. Get together 2022 payroll documentation, including payroll journals.
5. Organize paperwork & ready to utilize when PPP opens.

In addition to recommending this procedure, The Enterprise Center has identified a core of service providers to assist achieve the plan. These service providers target Black- and brown-owned businesses. They will be tasked with doing outreach to these businesses and helping with upfront paperwork. For their work, they will be paid a flat fee for each small-scale business that they certify every bit "PPP Ready," having completed 100 pct of the PPP awarding checklist.

PPP PREP solves three problems at one time

1. PPP PREP helps overcome long standing data deficiencies. By utilizing a data-intake form, it addresses the lack of quality data on Black- and dark-brown-owned businesses by building its own database of business owners by size and sector. This deficiency of information on Black- and brownish-owned businesses consistently undermines business organisation owners as they seek to abet for additional resources and support.
2. PPP PREP makes sure we don't accept a repeat of round one of PPP. By preparing Black and brown business owners for PPP, the PPP PREP program helps ensure that the federal relief program volition quickly, and fairly, become to the businesses who demand it.
3. PPP PREP helps build a long-term ecosystem for recovery. Past engaging, and compensating, a network of service providers to engage in grooming work for Blackness- and brown-owned small businesses, The Enterprise Eye is cultivating the connective tissue of a pocket-size business ecosystem. This ecosystem, and the organizations that bind information technology together, will exist vital as the country moves from an economic relief to an economic recovery stage of the coronavirus pandemic. As we've previously written, harnessing the ability of local institutions will be vital for an inclusive recovery.

A telephone call to activeness: A go ready campaign in Philadelphia and around the nation

Every bit nosotros wrote in November, local stakeholders do not have time to spare to go organized for the forthcoming federal spend. It is now here. Local leaders must get organized now. They should follow Philadelphia's model to build a strong infrastructure to get PPP money to their smallest entrepreneurs. Local economic leaders should:

1. Identify core entrepreneurial service providers for businesses endemic by entrepreneurs of colour;
2. Develop a "PPP ready" checklist to certify that entrepreneurs of color have all their paperwork together to successfully utilise for PPP loans;
3. Set a goal for number of PPP Ready Businesses, raise capital, and develop a flat-fee model to incentivize service providers to partake;
4. Launch a Get Ready entrada of outreach to entrepreneurs;
5. Ensure that small enterprises with the right paperwork become routed to banks and others that can execute the PPP loans, to ensure that the capital gets to businesses that need information technology in a timely manner.

Banks and others who are making large philanthropic contributions have a role to play too

they should immediately fund PPP PREP efforts across the country to ensure that Black- and dark-brown-owned businesses are on equal footing to utilise for PPP dollars and can brand information technology through the winter. This is a force per unit area-test for their commitments to racial equity.

The ability to reach the most vulnerable businesses requires a new small business ecosystem––1 that gives disadvantaged businesses the financial navigation they need from a closely knit network of business concern back up organizations, back function providers and banks and lenders.

There is a relatively short fourth dimension window in which this must happen. President Trump's late dark diatribe confronting the relief packet may have bought local stakeholders some time to become aligned to prepare their Black- and brown-owned businesses for PPP. But even so, this is no low-cal lift, given the fragile nature of these businesses and the surge in Coronavirus cases. This work is necessary if we want to avert the mistakes of the first round of PPP.

Fortunately, cached within the 5,500 pages of the Coronavirus relief and omnibus bill, there is some help. The bill extended the borderline for spending the the flexible cake-grant money in the Coronavirus Relief Fund until Dec 31, 2021. These funds must exist spent in a fashion that was not anticipated in the previous year'south upkeep. This gives local stakeholders a full additional year to spend these funds in means that strengthen intermediaries for distributing PPP funds.

Our hope is that these early efforts tin build into longer term intermediaries to leverage future federal spending as the nation builds back better.

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Della Clark is president of The Enterprise Centre. Bruce Katz is founding manager of the Nowak Metro Finance Lab at Drexel University. Colin Higgins is a senior inquiry fellow at the Nowak Metro Finance Lab

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Source: https://thephiladelphiacitizen.org/can-philly-perfect-ppp/

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