Supporting Small and MinorityOwned Businesses Through the Pandemic (EventID=111151)

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Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Thursday, February 4, 2020, from 3:30 p.m. (ET) Subcommittee on National Security, International Development and Monetary Policy Chair Himes and Ranking Member Hill will host a virtual hearing entitled, “Supporting Small and Minority-Owned Businesses Through the Pandemic." ___________________________________ Witnesses for this one-panel hearing will be: • Nneka Brown-Massey, Founder and Creative Director, Innovative Supplies Worldwide, Inc., on behalf of Main Street Alliance • Gary Cunningham, President and CEO, Prosperity Now • Cliff Kellogg, Executive Director, C-PACE Alliance • Everett Sands, CEO, Lendistry • Holly Wade, Executive Director of Research and Policy Analysis, National Federation of Independent Business ___________________________________ Overview The COVID-19 pandemic continues to have major health, economic, and financial ramifications globally and in the United States, including for small businesses and minority-owned businesses. Congress has responded with several programs, like the Paycheck Protection Program (PPP), intended to ensure these small businesses do not fail through no fault of their own, however small businesses and minority-owned businesses continue to struggle. In the aftermath of the 2008 global financial crisis, Congress established the State Small Business Credit Initiative (SSBCI) to support state programs designed to help provide credit and investments in small businesses. The result was a program that leveraged $1.5 billion in Federal funds to support $10.7 billion in loans and investments that helped small businesses create or retain over 240,000 jobs. This hearing will explore the evolving financial needs of small businesses, and consider proposals that build on such programs, like SSBCI, to provide additional support during the pandemic and beyond. COVID-19 and challenges for the small business environment As COVID-19 has wreaked havoc on the economy, and small businesses have borne significant pain. According to a study out of UC Santa Cruz, the number of active U.S. business owners plunged by 22% from February to April last year, driven in part by precipitous drops in active Black and Latinx business ownership, which experienced a 41% and 32% decrease in business activity, respectively. Women business owners also experienced a disproportionate loss in business activity at the start of the pandemic, and overall business activity was still dampened through June, when the study ended. According to a Harvard Business Review survey taken after the onset of the pandemic, the “vast majority” of small businesses stated that they had less than two months of expenses on hand to get through an emergency. With businesses facing more bankruptcies than they had since the fallout of the 2008 financial crisis, Congress enacted numerous programs through the CARES Act and subsequent legislation to provide temporary relief to small businesses, including the Paycheck Protection Program (PPP) which is administered by the Small Business Administration (SBA) and Department of the Treasury, and the Main Street Lending Program (MSLP), which was run by the Federal Reserve with support from Treasury. Congress has also provided funding for Economic Injury Disaster Loans (EIDL) emergency grants, among other programs. Despite these programs, businesses were unable to access needed capital and have had to shutter their doors permanently. Indeed, although both the PPP and the MSLP have provided help to small businesses, there have been concerns these programs only helped some businesses to a certain degree or experienced a lower than expected uptake. For example, the MSLP took three months to become operational, and was not available to non-profits until months after its inception. The Congressional Oversight Commission (COC) examined the MSLP in August and found that many potential borrowers were still unfamiliar with the program. Moreover, the MSLP contained several constraining conditions, including a minimum loan size threshold, a requirement that loans be repaid in full, and a requirement that borrowers have unmet credit needs.8 All of the Federal Reserve emergency lending facilities created through the CARES Act, including the MSLP, were eliminated at the end of 2020, and the deadline for new MSLP transactions passed on January 8, 2021.9 Although activity in the MSLP increased in the final months of its existence, the program ultimately supported about $16.5 billion in loans, well short of the $600 billion in capacity that as announced upon the program‘s establishment. Small businesses also encountered difficulties... Hearing page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=407099