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PPP loans failed to prioritize low-income areas: RPT

Center for Public Integrity Senior Reporter Jamie Smith Hopkins joins Yahoo Finance's Kristin Myers to break down the latest on stimulus negations, and what key priorities should be for the agreement.

Video Transcript

KRISTIN MYERS: I want to turn now to Jamie Smith Hopkins, senior reporter at the Center for Public Integrity. Jamie has been investigating and writing about PPP loans and who they helped, or more importantly, who they didn't. Jamie, thank you so much for being with us here today. I want to start with some of your latest reporting that PPP loans were supposed to go to businesses in underserved communities. But then, your reporting found that it didn't. Talk us through some of what you found.

JAMIE SMITH HOPKINS: Great. So I collaborated with Taylor Johnston and Pratheek Rebala in my newsroom and we crunched the data. And what that showed is that although Congress wanted the Small Business Administration to ensure that PPP loans prioritized small businesses in underserved markets, which includes low-income communities and rural areas.

That data shows that these loans didn't go to those areas in a priority fashion. That in fact for low income areas, the share of businesses that received those loans didn't quite match up to the share of small businesses in those areas, which as economists point out to us, really doesn't suggest that they were prioritized.

KRISTIN MYERS: So how do you think that happened? Is it the way that the program was structured? I know I was reading in your report that they didn't get demographic data from some of these businesses, about the zip codes that they were in, et cetera. So I'm wondering really how a program that was supposed to help businesses in underserved communities really didn't.

JAMIE SMITH HOPKINS: Right. So the SBA did collect addresses from companies, but what they didn't collect was the demographic information of the principals who own those businesses. So things like race, gender, whether the owner is a veteran. These are things that the SBA typically asks for its loan programs and didn't in this case.

Some lenders collected it anyway. And so, there's a little bit of information on that, but most of it is just a blank. And the SBA will collect that information as recipients ask for those loans to be forgiven. So we may get a better sense of that later, but right now that's unclear.

And so, when people have analyzed the data, what they've done is look to see where did it go. And to answer your question, part of what it looks like is that for very small businesses, businesses with fewer resources, they just didn't have the kind of help that larger small businesses did as they were applying for these loans. And so sometimes, that meant they didn't get it as fast. Sometimes it meant they didn't get it at all.

And I talked to small business owners who found the process really difficult. They're trying to negotiate, trying to navigate this at a time when they can't find help getting somebody on the phone to help them at a bank or financial institution was really difficult, and they're trying to keep their business from going under. And so for instance, one small business owner mentioned to me that any time that she could she could get an order in from a customer, she was of course, going to prioritize that.

KRISTIN MYERS: You know, we've talked to a lot of mayors and even governors on this show that have really talked at scale what the impact that this pandemic has had, at least on budgets. You know, state and local budgets. And I can only imagine if we dive in more deeply, we can start talking about what the impact financially has been on these communities.

So as you've talked to some of these small business owners, have they really kind of highlighted for you how the economic downturn has impacted those underserved communities where they are currently doing business, how those communities have been impacted? Not just from the pandemic, but also as we see a lot of these small businesses closing because they can't get the funds to stay open.

JAMIE SMITH HOPKINS: Right. I mean, it ends up being really difficult because if you didn't have a big cushion going into a disaster like this, it's that much harder. And so, I did hear that from some small businesses that they're really concerned about the communities that they're in, that they're-- for businesses that are-- a lot of their business comes from other small businesses, they can see the impact of their customers.

Of people who are relying on residents who live in the area, they can see the impact that the rough economy is having on residents. So there is ripple effects. And for areas that have less income overall, any sort of downturn hits harder. And in fact, that's sort of the logic behind prioritizing areas like this, that they're going to need to help more to make sure they can survive this.

KRISTIN MYERS: Is it too late? I mean, you were talking to business owners. You analyze some of the businesses the areas that they're in. We've heard about companies that frankly have closed and they won't be coming back. Do you think it is a little bit too late, even if in this next stimulus package, perhaps they try to right the ship, so to speak?

JAMIE SMITH HOPKINS: Well I mean, it is too late for some businesses, but it isn't for others. And it's two groups really. I mean, there are the businesses that couldn't get the first time and are hopeful that perhaps this time will be different. And then, there are businesses that were able to get it the first time and they're really small, and are telling the lenders that they worked with that they need another one to get through what looks like it's going to be a very long winter.

So, yeah. I mean, if a program doesn't roll out the way it was expected to do, that's going to have consequences that sometimes cannot be undone. But there is a second chance that-- there may be a second chance for some businesses because there are a lot of businesses are just trying to hang on.

I talked to the owners of printshop in Minneapolis, for instance, that are-- they're down to just the two of them, the husband and wife that own the business. And they're just doing the best they can to keep it going. So there are a lot of businesses that are still trying to make a go of it and it sounds like it's those businesses that could most use the help at this point.

KRISTIN MYERS: So speaking about that second chance, as you're calling it, we do have that bipartisan stimulus package that's now being split into two bills. One of them, which sounds like it's probably the more likely to pass right now because it doesn't contain those two sticking points, which is in that smaller bill as you guys can all see on your screen right now.

That larger bill would include funds to small businesses. As you're seeing it, should this second pass this second time around, should the program really do a more diligent job and really try to start prioritizing, if it didn't the first time around? Some of these businesses, again, that you were talking to that are in these underserved communities-- I'm wondering how you're seeing where the priorities really need to be, especially on this second pass.

JAMIE SMITH HOPKINS: Yeah. So I asked people that, both business owners and experts who've been following this. And you know, some of the proposals for another round of the Paycheck Protection Program would try to have-- would try to focus a little bit more lowering the number of employees to qualify, having set asides for very small businesses.

Some of those, just in the way that the agency decides to roll this out. So one economist I talked to noted that the agency could work with communities to help them get the word out to businesses and help businesses apply. And getting the word out and helping people through the process turns out to be incredibly important.

Because what I heard from some of the smaller lenders that we're working with very small businesses and from some of the businesses is that just you know being told yeah you do qualify, because some people are getting misinformation about whether they did or not. And being told, OK. Let's help you through this process really can make a difference.

KRISTIN MYERS: All right. Well, we are going to leave that there. Jamie Smith Hopkins, senior reporter at the Center for Public Integrity. Thank you so much for breaking down that report and some of that research that you've done.

JAMIE SMITH HOPKINS: Thank you for having me on.