Paycheck Protection Program: Program Changes Increase lending to the smallest businesses and in underserved locations

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What GAO found

The Paycheck Protection Program (PPP) supports small businesses with refundable loans for payroll and other eligible costs. Early lending favored larger and rural businesses, according to GAO analysis of the Small Business Administration (SBA) data. Specifically, 42 percent of Phase 1 loans (approved April 3-16, 2020) went to larger companies (10 to 499 employees), even though those companies made up only 4 percent of all US small businesses. Similarly, rural businesses received 19 percent of Phase 1 loans, but made up 13 percent of all small businesses. Most phase 1 loans were issued by banks.

In response to concerns that some underserved businesses – especially self-employed, minority, women, and veteran-owned businesses – were having difficulty obtaining credit, Congress and the SBA made a number of changes that increased lending to these businesses . For example,

  • The SBA approved around 600 new lenders in phase 2 (which ran from April 27 to August 8, 2020), including non-banks (generally, non-deposit credit institutions).
  • After phase 1, SBA developed guidelines to help self-employed people participate in the program.
  • In Phases 2-3, the SBA aimed to finance minority-owned businesses, in part through community development financial institutions. (Phase 3 ran from January 12 to June 30, 2021.)

When PPP closed in June 2021, lending in traditionally underserved counties was proportional to their representation across the small business community as a whole (see figure). While lending to companies with fewer than 10 employees remained disproportionately low, it increased significantly over the course of the program.

Paycheck Protection Loans by Company Type or County

Why GAO conducted this study

The COVID-19 pandemic created significant turmoil in the US economy, resulting in temporary and permanent business closings and high unemployment. In response, in March 2020, Congress established PPP under the CARES Act and eventually provided a power of attorney of approximately $ 814 billion for the program in three phases. When the initial program funding expired within 14 days, concerns quickly arose that certain companies could not access the program, leading to a number of changes by Congress and the SBA.

The CARES Act contains a provision for GAO to oversee the federal government’s efforts to respond to the COVID-19 pandemic. GAO has issued a number of reports on this program and made a number of recommendations to improve program performance and integrity. This report describes trends in small business and lender participation in PPPs.

GAO analyzed credit-level PPP data from SBA and county-level data from four products from the US Census Bureau and surveyed a generalizable sample of PPP lenders stratified by lender type and size. GAO also reviewed laws, preliminary final regulations, agency guidelines and relevant literature, and interviewed SBA officials.

For more information, contact John Pendleton at (202) 512-8678 or [email protected]


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