Facing the Collapse of Small Businesses, Cities Need To Get PPP Right

By:

Phillip Berkaw
Della Clark

January 27, 2021 - (5 min read)

Learn how you can prepare local businesses to apply for PPP by viewing the recording of our webinar featuring Bruce Katz, Director of the Metro Finance Lab at Drexel University.

The first $5 billion of Paycheck Protection Program (PPP) funds approved by Congress in December are officially out the door. In an acknowledgment that the first round of PPP funds excluded many small businesses and businesses owned by people of color, Congress made several revisions to the program’s design. These include new loan and forgivability terms, a reduced maximum loan size, and set asides for community lenders and small businesses with 10 or fewer employees.

These changes – intended to level the playing field for underbanked businesses, which are disproportionally Black- and brown-owned – are a step in the right direction. The onus of ensuring that PPP reaches disadvantaged businesses in a timely manner, however, ultimately falls to local stakeholders.

Without on-going, strategic coordination at the local level, city leaders will fail to live up to the commitments many of them made to prioritize racial equity and economic justice in the summer of 2020. They, not Congress, are now in the drivers’ seat. And they must adopt a more determined approach.

PPP Prep

The National League of Cities is advancing the playbook created by The Enterprise Center in Philadelphia. The model, called “PPP Prep”, is a collaborative effort among local chambers of commerce, business service providers, CDFIs, banks, and funders to provide PPP preparation services to Philadelphia small businesses to get them ready to apply for relief.

City Hall, as well as organizations outside city government, can follow the “5 Steps to PPP Readiness” below. Any institution with enough clout to quickly gain community support ahead of the March 31^st deadline should lead the charge. It’s not too late.

Five Steps to PPP Readiness

1. Identify core entrepreneurial service providers for businesses owned by entrepreneurs of color.

Example: Anticipating renewed PPP funding in December, The Enterprise Center gained the support of 147 service providers across the city. Some are nonprofits tasked specifically with conducting outreach to Latinx communities. Others are banks and CDFIs that made commitments to process applications. Additionally, The Enterprise Center secured the pro bono support of a local law firm to conduct two webinars for potential PPP applicants: one focused on businesses with employees, and another on businesses without a payroll.

2. Develop a “PPP ready” checklist to certify that entrepreneurs of color have all their paperwork together to successfully apply for PPP loans.

Example: Both The Enterprise Center in Philadelphia and the Enterprise Center in Chattanooga (different ownership) created online checklists for PPP applicants to ensure they have the necessary paperwork. Service providers must be available to answer questions for prospective applicants whose biggest challenge will be gathering their application materials. If feasible, online intake forms are helpful for understanding constituent needs and disseminating helpful information throughout the process.

3. Set a goal for the number of PPP Ready Businesses, raise capital, and develop a flat-fee model to incentivize service providers to partake.

Example: The development of collective, ambitious, and measurable goals is a crucial step in the process. Using data from the first round of PPP allocations as a baseline, the Philadelphia team set a goal that for every 2,000 applications filed, applicants would receive $100 million in loans. To encourage the participation of service providers which are helping small businesses complete their applications, The Enterprise Center supports them in obtaining SBA-approved agent fees of 1% for loans made up to $350,000.

4. Launch a Get Ready campaign of outreach to entrepreneurs.

Example: Many business owners, especially sole proprietors, did not know they were eligible for the first round of PPP. Others were unable to apply because they were intimidated by the process. The Enterprise Center partnered with chambers of commerce, lenders, and government agencies to get the word out. They created a press release, promotional videos, a social media toolkit, and cultivated an email list where they could provide critical information on a daily basis to potential applicants.

5. Ensure that small enterprises with the right paperwork get routed to banks and others that can execute the PPP loans, to ensure the capital gets to businesses that need it in a timely manner.

Example: Many lenders did not fulfill their potential in processing PPP loans in the first round. The Enterprise Center garnered the enhanced support of PPP-eligible lending institutions through an outreach campaign that included individual pleas to bank owners. As large batches of applications are completed, service providers can source the logical lending institution to process them. For additional information on PPP Prep, please register here for our webinar on January 28^thor refer to the article “The Virus and the City: Can Philly Perfect PPP Prep?” co-authored with Della Clark (also the co-author of this blog) and published in the Philadelphia Citizen. The article includes additional information about changes to this round of PPP, as well as a five-step plan for business owners to prepare to apply.

Learn More

For additional information on PPP Prep, register for our webinar on January 28^thor refer to the article “The Virus and the City: Can Philly Perfect PPP Prep?” co-authored with Della Clark, published in the Philadelphia Citizen.