Alignable: Reveals Why $130 Billion In Relief Sits Idle
DATA ANALYSIS | PRESS RELEASE |
Minority Business Application Inequity, Independent Contractor Confusion & Flexibility Act Obscurity
BOSTON, MA, June 18, 2020: Alignable’s Small Business Pulse Poll this week delved into the reasons why the CARES Act Paycheck Protection Program (PPP) still has $130 billion+ available for small business owners, while many are struggling financially through their recovery.
Three key findings in the poll of 7,300+ small business owners from June 12-15, 2020 point to:
- Minority-owned businesses receiving far fewer PPP loan approvals than nonminority-owned firms
- Eligibility confusion among solopreneurs
- A lack of awareness of the Flexibility Act, which eased restrictions making the PPP generally more appealing to small businesses.
Reason No. 1 -- Minority-Owned Small Business Rejection Rate: 1.8X Higher Than Nonminority Companies
The Pulse Poll found that only 54% of minority-owned small businesses that applied for PPP funds have received them to date, compared to 79% of nonminority-owned small businesses. And rejection rates for minority-owned small businesses were 1.8 times higher than for nonminority-owned companies (11.9 vs. 6.6).
“There’s a major funding disparity here between minority-owned businesses and other companies that just shouldn’t exist,” said Alignable’s President and Co-Founder Venkat Krishnamurthy. “The SBA should look into this issue and work to remedy it quickly, as many minority-owned businesses are really struggling now.”
Beyond the 46% of minority small business owners who told us they had applied for funds and have not received them yet, another 48% of minorities say they never applied. One poll participant told us why: “This is a loan with interest. I don't need to get into more debt. And I would fall under minority woman business owner status -- I don't have a chance.”
BY THE NUMBERS: 15% of U.S. small businesses are minority-owned. Combining this number with average loan amounts, the difference in approval rates, and the estimated number of loan requests, this amounts to approximately $17 billion or 13% of the unallocated PPP funds.
Reason No. 2: Solopreneurs Remain Perplexed About Eligibility
In this week’s poll, 37% of solopreneurs -- business owners working alone -- mistakenly believed they shouldn’t apply because they don’t have employees. Here’s what a few of them told Alignable:
“With the rules as they were, and not having employees other than myself, I didn’t think I qualified.”
“It’s easy for the government to take from everyone, but never truly give back. It wasn’t clear as an independent if the loan would be forgiven, or if I qualify when my livelihood is based on commissions.”
“Fifth Third bank refused to help because I didn't have a business account with them -- only a personal account. My business is a sole proprietorship, and they didn't care to help me.”
NEW CALCULATIONS: Solopreneurs own 81% of U.S. small businesses. Had these businesses applied and received an average loan of $10,000 each, this would account for $50 billion or 38% of the unallocated funds.
Reason No. 3: Small Businesses Don’t Know About The Flexibility Act
While the Flexibility Act has received a lot of media coverage since it became law in early June, a whopping 76% of small business owners polled said they haven’t heard anything about it.
When asked how many intended to apply for the PPP loans now that Congress eased some of the earlier restrictions, 21% of the few entrepreneurs who knew about the Flexibility Act said, “Yes.”
In fact, the largest group of small business people saying that they intend to apply now consists of minority business owners who had not applied earlier -- 44% plan to apply before the June 30th deadline. And 34% of women-owned business leaders also plan to apply.
“With the PPP deadline looming, it’s vitally important for small business owners to apply if they haven’t yet, so they can try to keep their businesses alive,” said Alignable Co-Founder and CEO Eric Groves. “Small businesses that received PPP loans are in much better shape right now than those who haven’t yet, so give your business a fighting chance and apply now.”
MORE NUMBER CRUNCHING: According to the Alignable poll, 50% of small businesses have yet to apply for the PPP. Combining that figure with the average loan amount ($111,000), the overall approval rates (70%), and the 21% of small businesses that say the Flexibility Act has convinced them to apply, another $50 billion of the unallocated funds could be distributed.
SUMMING IT ALL UP: Adding that $50 billion estimate to the extra $17 billion that minority business owners should receive, plus the $50 billion that solopreneurs left on the table, we’ve accounted for $117 billion of the $130 billion that remains for small businesses. If all of these unallocated funds actually went to the businesses that qualify for them, the U.S. small business economy would likely recover much more quickly.
Beyond that, many poll participants commented that they could use yet another round of federal funding to help them through this particularly challenging phase of recovery. Many small businesses in dire straits as they try valiantly to bring back customers and rebuild their operations.
Survey Methodology: Alignable.com is the largest online referral network for small businesses with more than 5 million members across North America. Alignable surveys are conducted via email with a random sample of the network’s vast membership database on a weekly basis.
Sample sizes range from 100,000 to 1 million small business owners, depending on the poll. Alignable’s samples are well matched to the U.S. Census Bureau data of U.S. businesses with 100 employees or less.
The poll referenced in this release was conducted from June 12-15, 2020 among 7,317 small business owners.
Alignable’s surveys are the most immediate and comprehensive polls available reflecting the sentiments of small business owners in North America.
Stay tuned for new reports, trends, and poll findings from the Alignable Research Center.
For more information on this poll or dozens of others, or to arrange interviews, please contact Chuck Casto via email: chuck@alignable.com or text: 508-314-3284. #MyMoneyStaysLocal #SmallBusinessStrong.
Also, please feel free to post any comments related to your experience with the PPP below. We're eager to hear your thoughts.
Comments (1-4)
The PPP Flexibility Act of 2020 was a life saver in terms of making my PPP loan forgiveable in the long term. Now I can stretch out using the PPP funds that I received in May into October paying the staff that I kept on during the lockdown here in Florida that lasted from mid-March to June and to pay the furloughed staff that I was able to rehire in June once we were allowed to reopen. It will also pay utility bills (electric bills are very high here in Florida in the summer!). By not paying myself from the PPP Loan, with the new 24 week expense period, I should have enough PPP loan money to cover staff payroll and utilities and have it all forgiven. That is a blessing, because the EIDL SBA Loan that I was able to get in June will keep us afloat through the end of the year after the PPP Loan runs out if business does not improve (we are at 50% of pre-Covid19 revenue in June and so far in July) or there is another lockdown here in Florida, where the virus is surging out of control. The EIDL Loan will, of course, have to be repaid, but I can sleep at night knowing I have a financial cushion if the worst happens and revenues don't rebound. Knowing that I won't lose the business that I have spent 24 years building is a comfort at 70 years of age.
I'm afraid your conclusions on both solopreneurs and minority owned businesses are induced incorrectly.
A PPP for ALL contractors must be arranged for the INDIVIDUALS who file. Schedule C with their 1040.
If they have a loss on their Schedule C, which according to the last 28 years of IRS statistics, over 60%, give or take a couple of points any given year, of the nation's small businesses have tax LOSSES any given year.
If the here is no gain for the reportable and taxable income for 2019, that individual contractor Does Not qualify for a PPP loan, and neither banks nor non-bank SBA LENDERS won't be able to process loans.
The result is that your numerical adaptions are wrong and therefore the dollars and percentages are wrong, because a majority of people are unqualified by the rules, not because they are solopreneurs or minorities.
only a fraction of those who had profits applied because their profits were so small, that at the manner in which the loan was calculated, created loans of sometimes only a few hundred or a few thousand dollars.
Many individuals feel that for small amounts of money they were unwilling to take the coincident tax risks of IRS audits and reviews in the future, and by far, those were the reasons so many folks didn't apply.
Where they are missing an opportunity is in not applying to the SBA directly for an EIDL, limited to an upside amount of $2 million, since many banks are only processing PPP's. It irradicates the problem of not having an account at any particular bank, since the app is directly to the SBA.
ALL the rules and procedures have become complex. The SBA wasn't ready for what was thrust on them by Congress, let alone in a work from home environment.
So while it's easy to be very critical, fact is that over $2 trillion, that's Trillion like 2 followed by (12) twelve 0's, has been paid out and the just under $130 billion you report is left, almost $60 billion can go to EIDL's. At 3.5% interest for up to 10 years, with no collateral and no guarantee by any owner or individual, there has never been a SBA program so generous sine the SBA began as an agency of our government.
Nothing is perfect, but it's perfectly aligned with what most small business can afford. The period was extended to March of 2021, and can start now, so it's almost a 9 month budget that can be financed over a 10 year payback.
Its amazing to me that there is so much money left when my bank, Wells Fargo, gave away the first wave of money instantly then during the second wave my meager request for $12,000 was cut in half because they claimed to have run out of money.
Note that I applied instantly ...when I was ALLOWED...to yet only qualified partly!!!
My business of marketing my patented invention was impacted by kovid-19 when the fabricator of my product went out of business even now finding a new contract manufacturer is not possible even though with enough money I can produce myself. BUZZBULB.com HELP