August 22, 2022
Main Street Monday – 2021 PPP Saved Smaller, More Vulnerable Small Businesses says Bloomberg
“In order to deploy funds as fast as possible, the US enrolled big banks to distribute the loans, citing the pre-existing relationships banks had with businesses across the country. The ripple effect was that the distribution of these loans was skewed, with many smaller businesses shut out of the first tranche of loans in April 2020, which was depleted within two weeks,” reads a Bloomberg article.
In 2021, dozens of new lenders joined PPP including Community Development Financial Institutions (CDFIs) and online fintech lenders. As a result, large commercial banks originated fewer PPP loans in 2021. The new lenders caused a shift in the program and the small business/borrower demographics:
• 42% of PPP loans went to small businesses with less than 10 employees in 2020, and in 2021, this raised to 51%.
• The share of PPP loans going to self-employed people was 9% in 2020 but increased to 86% in 2021 according to the Government Accountability Office.
• The average PPP loan size dropped to about $43,000 in 2021 compared to over $100,000 in 2020.
The industries reached during 2020 and 2021 PPP also shifted. Fewer car dealers, law firms, and religious organizations received loans in 2021. Instead, beauty salons, taxi services, and beef cattle ranching and farming had more access to 2021 PPP loans.
“I freaked out,” Greg Metzler, an owner of Lux Salon, says. “When the doors were shut, and there was no money coming in, I had a complete meltdown of just stress, and I thought ‘I’m 55, this is my entire future, this is everything I’ve built’.” Greg Metzler says of his 2020 PPP loan, “It helped me to not fall behind”. The PPP loan Metzler received in 2021 of a similar size “was truly a savior”, emphasizing the impact of round two PPP.