Small Business Relief Pursuing Equitable ...
Challenges and Opportunities for
Pursuing Equitable Distribution of
Small Business Relief
Of?ce of Evaluation Sciences
August 2021
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Table??of??Contents? ?
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Table??of??Contents?
1? ?
Background?
2? ?
Challenges??encountered?
Documentation??burdens?
Legislative??constraints?
4? ?
4? ?
5? ?
Lack??of??business??data?
5? ?
Lack??of??strategic??data?
7? ?
Success??stories?
Application??assistance?
7? ?
7? ?
Representative??staff??and??infrastructure?
Creative??outreach?
9? ?
10? ?
Two-stage??application??process?
Data??collection??and??use?
11? ?
12? ?
Building??evidence?
Where??evidence??is??most??needed?
13? ?
13? ?
Approaches??to??evidence-building?
Leverage??an??SBA??direct??program?
14? ?
15? ?
Collaborate??with??a??local??government?
Collaborate??with??a??federal??program??for??non-emergency??capital?
15? ?
16? ?
Use??a??setting??outside??of??capital??provision?
17? ?
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1? ?
?
Background? ?
The??Small??Business??Administration??(SBA)??has??strategic??goals??to??support??small??business??revenue??
and??job??growth??and??restore??small??businesses??after??disasters.??As??part??of??these??goals,??the??SBA??wants??
to??know?w
? hat??strategies??it??can??implement??to??help??women,??minority,??and??other??underserved??
entrepreneurs??recover??more??quickly??from??the??coronavirus??(COVID-19)??pandemic?.1?? ? ?
?
Through??Paycheck??Protection??Program??(PPP)??forgivable??loans,??Economic??Injury??Disaster??Loans??
(EIDL),??and??other??grants,??loans,??and??debt??relief,??SBA??distributed??more??than??$1.3??trillion??dollars??of??
aid??to??small??businesses??during??the??pandemic.??PPP??reforms??in??February??2021??explicitly??put??equity??at??
the??center??of??relief??policies??to??ensure??that??¡°Mom-and-Pop??businesses??in??underserved??
communities¡±?2?? ?could??get??the??help??they??needed.?? ?
?
A??great??deal??of??federal??COVID-19??relief??funding??has??also??been??disbursed??at??the??local??level.??For??
example,? ? ?
¡ñ
The??Coronavirus??Aid,??Relief,??and??Economic??Security??(CARES)??Act??signed??March??27,??2020??
provided??$5??billion??of??Community??Development??Block??Grant??(CDBG)??funding,??for??uses??
including??economic??development??assistance??to??small??businesses.??This??amount??was??on??top??of??
$3.4??billion??in??annual??CDBG??grants??in??the??fiscal??year??2020.?? ?
¡ñ
The??CARES??Act??also??provided??$150??billion??to??states??for??uses??including??"Expenditures??
related??to??the??provision??of??grants??to??small??businesses??to??reimburse??the??costs??of??business??
interruption??caused??by??required??closures."3?? ?
¡ñ
The??Heroes??Act??signed??May??15,??2020??allocated??$15??billion??for??a??one-year??state??and??local??
government??small??business??grant??program.?? ?
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SBA¡¯s??partnership??with??the??Office??of??Evaluation??Sciences??(OES)??allows??it??to??better??understand?
community-based??approaches??that??localities??have??taken??to??help??small??businesses.??In??November??
2020,??OES??produced??a??report??titled?¡°? I? ncreasing??Access??to??Small??Business??Grant??and??Loan??Programs??
for??Historically??Underserved??Groups?,¡±??which??outlined??challenges??for??local??governments??setting??up??
relief??programs.??That??report??drew??on??conversations??between??OES??team??members??and??officials??in??7??
cities,??as??well??as??desk??research??about??administrative??burden??and??equity.?? ?
?
The??present??report??is??an??extension??of??that??descriptive??work,??which??was??further??spurred??by??a??
January??2021??Executive??Order??outlining??the??Biden??Administration¡¯s??policy??that??¡°the??Federal??
1
U
? .??S.??Small??Business??Administration.??(May??28,??2021).??FY??2018-2022??Enterprise??Learning??Agenda??(FY2021??Update).??Retrieved??from??
?? ?
2
?U.S.??Small??Business??Administration??(March??9,??2021).??Fact??Sheet:??Changes??to??Paycheck??Protection??Program??by??Biden-Harris??
Administration??Increase??Equitable??Access??to??Relief.??Retrieved??from??
?
uitable-access? ? ?
3
?Department??of??the??Treasury??Coronavirus??Relief??Fund??program??guidance??(January??15,??2021).??Federal??Register,??Vol.??86.??Retrieved??from??
.?? ?
2? ?
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Government??should??pursue??a??comprehensive??approach??to??advancing??equity??for??all.¡±??The??Executive??
Order??gave??this??definition:?? ?
?
¡°The??term??¡°equity¡±??means??the??consistent??and??systematic??fair,??just,??and??impartial??treatment??
of??all??individuals,??including??individuals??who??belong??to??underserved??communities??that??have??
been??denied??such??treatment,??such??as??Black,??Latino,??and??Indigenous??and??Native??American??
persons,??Asian??Americans??and??Pacific??Islanders??and??other??persons??of??color;??members??of??
religious??minorities;??lesbian,??gay,??bisexual,??transgender,??and??queer??(LGBTQ+)??persons;??
persons??with??disabilities;??persons??who??live??in??rural??areas;??and??persons??otherwise??adversely??
affected??by??persistent??poverty??or??inequality.¡±4?? ? ?
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In??light??of??this??Administration??priority,??the??topics??explored??in??the??initial??work??are??more??relevant??
than??ever.?? ?
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After??releasing??the??2020??report,??OES??continued??to??engage??with??some??of??the??same??local??officials??and??
some??new??ones.??OES??also??spoke??with??several??individual??¡°mentors¡±??and??groups??that??provided??
technical??assistance??to??applicants.??This??document??shares??further??information??about??what??cities??
found??challenging??in??disbursing??small??business??relief,??as??well??as??strategies??they??believed??helped??
them??do??so??more??equitably.??For??example,??one??local??grants??administrator??said:?? ?
?
¡°?There??were??a??lot??of??lessons??learned??as??programs??were??implemented.??Our??initial??microloan??
program??was??stood??up??in??days.??We??noticed??disparities??and??issues??with??equity,??so??we??paused??the??
program??and??made??changes.??The??program??evolved??a??lot.??We??kept??strategizing??to??make??it??equitable.??
At??the??end??we??feel??it??was??accomplished??well.??Some??of??the??lessons??we??learned??were??used??when??we??
did??the??other??city??programs.?¡±5?? ? ?
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Local??discretion??in??program??design,??combined??with??variation??in??the??key??challenges??for??a??locality??
(e.g.,??tighter??or??looser??constraints??on??administrative??time,??sophisticated??versus??outdated??software,??
standing??vendor??contracts??versus??freedom??to??negotiate)??means??that??different??cities??take??different??
approaches.??Even??within??a??single??city,??tactics??change??over??time.??Learning??about??which??of??these??
approaches??are??more??and??less??successful??can??contribute??to??an??evidence??base??about??what??works.??
However,??most??cities??were??working??too??rapidly,??with??too??few??resources,??to??build??systematic??
evidence??during??program??implementation.??In??addition??to??capturing??their??anecdotal??impressions??
about??what??worked??well,??this??report??identifies??the??strategies??that??seem??most??in??need??of??rigorous??
evaluation,??and??provides??ideas??about??how??those??evaluations??could??be??conducted.? ?
4
E
? xecutive??Order??On??Advancing??Racial??Equity??and??Support??for??Underserved??Communities??Through??the??Federal??Government.??(January??
20,??2021).??
?
or-underserved-communities-through-the-federal-government/?? ?
5
Q
? uotes??shared??in??this??report??are??not??necessarily??verbatim,??because??although??careful??notes??were??taken,??interviews??were??not??recorded.??
All??interviewees??and??their??cities??are??presented??anonymously.?? ?
3? ?
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Challenges??encountered? ?
The??intent??of??this??report??is??to??focus??on??what??seems??to??work??rather??than??what??was??difficult.??The??
challenges??in??this??section??are??shared??because??(1)??some??of??them??point??to??seemingly??ineffective??
strategies??that??readers??may??want??to??avoid??implementing,??and??(2)??many??of??the??¡°successes¡±??can??only??
be??understood??as??ways??to??overcome??those??challenges.?? ?
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Cities??encountered??some??challenges??that??affect??access??to??funding??for??all??applicants.??Most??of??these??
challenges??tend??to??be??more??problematic??for??underserved??applicants,??who??may??have??less??time??and??
fewer??resources.??For??example,??difficulty??understanding??the??language??of??program??materials??
primarily??applied??to??people??with??more??recent??immigrant??backgrounds??or??lower??levels??of??education.??
Difficulty??interacting??with??online??materials??because??of??connectivity??or??technology??limitations??
primarily??applied??to??people??with??less??wealth??and??lower??incomes.??The??next??sections??discuss??some??
such??challenges??in??more??detail,??and??where??appropriate,??also??discuss??how??these??challenges??could??
disproportionately??burden??potential??applicants??from??underserved??groups.?? ?
Documentation??burdens? ?
Possibly??the??biggest??challenge??for??potential??applicants??was??in??providing??documentation??that??
proved??eligibility??or??prioritized??an??applicant??for??funding.??Many??cities??required??a??business??license??for??
applications.??Administrators??in??one??city??said??that??this??requirement??posed??a??barrier??for??home-based??
businesses??who??had??previously??not??seen??a??need??to??pay??$250??for??the??license.?? ?
?
The??most??burdensome??pieces??of??documentation??to??provide??were??tax??documents??and??Profit??&??Loss??
statements.??These??documentation??requirements??are??potentially??a??barrier??to??equity,??because??
businesses??that??are??smaller??with??fewer??resources??(e.g.,??no??staff??accountant;??no??accounting??
software),??or??which??operate??in??industries??with??less??need??for??regular??accounting??(e.g.,??creative??
industries),??have??more??difficulty??satisfying??the??requirements.??One??city??employee??said:?? ?
?
¡°?We??did??draft??a??sample??template??for??profit??and??loss??from??the??SBA??website.??If??they??had??a??tax??return,??
it??was??pretty??simple??for??them??to??drop??in??their??monthly??P&L.??But??had??one??person??we??referred??and??
our??PSO??was??trying??to??go??through??2??years??of??receipts??to??construct??that.??We??might??be??able??to??help??
her??if??we??still??have??money??left??when??she¡¯s??done,??but??it¡¯s??really??labor??intensive.?¡±? ?
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As??seen??at??the??end??of??the??quote??above,??documentation??requirements??also??created??burdens??for??local??
administrators.??Those??cities??that??allocated??funds??with??a??¡°points??system¡±??that??prioritized??based??on??
economic??(e.g.,??pre-COVID??revenue,??number??of??full-time??employees)??and??non-economic??(e.g.,??rated??
likelihood??of??surviving??the??pandemic??based??on??a??written??recovery??plan)??criteria??generally??had??
heavier??documentation??requirements,??making??them??potentially??more??burdensome??for??both??
applicants??and??administrators.??Even??efforts??to??limit??the??need??for??applicants??to??personally??submit??
documents??(e.g.,??the??SBA¡¯s??use??of??form??4506T??to??authorize??direct??the??Internal??Revenue??Service??
(IRS)??to??provide??federal??income??tax??information??to??SBA)??could??create??new??challenges,??as??seen??when??
IRS??backlog??and??processing??times??slowed??the??disbursement??of??disaster??loans.?? ?
4? ?
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