Small Business Administration Research Articles

Funding Crises: An Empirical Study of the Paycheck Protection Program

Though the medical damage wrought by COVID-19 has been examined thoroughly, economists and legislators are still seeking effective cures for the financial repercussions of the pandemic. To address the devastating consequences of business closures and millions of employees losing both their jobs and healthcare coverage during a public health emergency, the U.S. Congress funded a Paycheck Protection Program (“PPP”). That program immediately pumped more than a half-trillion dollars in loans out to five million businesses. But criticism has been swift and widespread, if sometimes spurious, with detractors attacking the award of loans to wealthy celebrities such as Kanye West, politically connected donors such as the Kushner family, and large corporations such as Shake Shack and Ruth’s Chris Steakhouse.In this Article, we conduct one of the first empirical studies of the central component of the largest financial bailout in U.S. history. We examine quantitative data released by the Small Business Administration to answer various competing claims about the effect of the PPP. Critics have accused the program of being administered as a partisan political tool for the president’s reelection, as a corrupt slush fund for cronies of the Trump administration, and as an incompetent waste of money on undeserving recipients. We test these hypotheses to evaluate the distribution of funds and whether the disbursement materially suffered from politics, corruption, or waste. We find that the lending process not only suffered from high-profile failures, it failed to target the neediest areas, particularly early on. Other studies present mixed findings on whether the PPP successfully protected paychecks. We conclude that critical data does not yet exist, as the PPP’s greatest weakness was in failing to reach businesses unable to survive long enough to apply for or to receive loans.Accordingly, we call for a start to the process of theorizing a model for future programs to fund economic crises, which avoids the worst mistakes of the PPP. In 2008 and 2020, the U.S. government engaged in massive transfers of money from the federal fisc to corporations and, on both occasions, the task was cobbled together during an emergency, with predictable failures and shortcomings. We consider successful economic responses and how they might guide more effective, fair, and efficient models for providing emergency economic funding in the future. We may soon need one to address the continuing financial devastation from COVID-19 itself.

Loan guarantees and credit supply

The efficiency of federal lending guarantees depends on whether guarantees increase lending supply or simply act as a subsidy to lenders. We use notches in the guarantee rate schedule for Small Business Administration (SBA) loans to estimate the elasticity of bank lending volume to loan guarantees. We show significant bunching in the loan distribution on the side of the size threshold that carries a more generous loan guarantee. The excess mass implies that increasing guarantee generosity by one percentage point of loan principal would increase per-loan lending volume by $19,000. Excess mass increases in periods with guarantee generosity, and placebo results indicate that the effect disappears when the guarantee notch is eliminated.

Time Is Money: The Importance of Community Banks in Small Business Administration’s Payroll Protection Program

We provide evidence that the focus of community banks on relationship lending to small businesses combined with their relatively simple organizational structure allowed them to respond faster to Paycheck Protection Program (PPP) loan requests than larger banks. Moreover, we find that community banks lent more per dollar of assets than larger banks. We also find more PPP lending per small business in areas in which community banks have higher pre-pandemic market shares. Finally, using community bank pre-pandemic share of deposits/assets as an instrument for the intensity of PPP lending, we find a negative and significant relationship between county level bankruptcy filings and PPP lending per small business. Overall, our findings suggest that community banks remain an important conduit for small business credit particularly during crises when a rapid response is required.

In Too-Big-To-Fail We Trust: Ethics and Banking in the Era of COVID-19

The COVID-19 economic crisis has brought to light something very broken in the American banking system—banks prioritize their own profits over the interests of those they serve and interests of social justice. And they are permitted to do so because they do not owe a fiduciary duty to their customers and are not social welfare maximizing entities.In an effort to support the economy, the US government passed numerous stimulus acts, which included, among other things, a Paycheck Protection Program (PPP), and the distribution of relief checks to consumers. To effectuate the massive distribution of liquidity on an expedited basis, the government relied on big banks. But instead of prioritizing the public welfare, the banks were focused on their bottom lines and thus did not carry out the true intent of the stimulus. For example, with respect to the PPP, although the Small Business Administration was required to process the loans on a first-come, first-served basis, the banks were not. And absent that requirement, the banks prioritized richer and bigger customers. As a result, women and minority-owned small businesses, as well as peripheral area-based small businesses, found themselves facing more barriers to getting loans. Similarly, with respect to the direct distribution of relief checks to consumers, banks prioritized their own interests over those of their customers. For example, in an effort to collect bank debt, banks froze and seized the funds from government relief checks deposited into consumer accounts before the consumers that needed those funds received them. Consequently, various state attorney generals and courts had to intervene, and mandate that the consumers be permitted to use the funds as the government had intended—for necessities like food and shelter.There are several techniques we can employ to modify banks’ ethical behavior and cultural norms. This Essay discusses such methods, which include (i) a top-down regulatory approach; (ii) the creation of market-led initiatives; (iii) an interpretive fix, offered by the judicial system; and (iv) a public criticism and shaming semi-regulatory approach.

Heuristics and political accountability in complex governance: An experimental test

A growing body of empirical work suggests that identifying the actors formally tasked with implementing policy can focus attention away from incumbent politicians. We examine the effects on blame attribution and voting intention of (a) the identifiability of a responsible policy worker (administrator), and (b) the evaluability of the policy work or outcome (policy failure), in the context of programs at two federal agencies (loans by the Small Business Administration and inspections by the U.S. Department of Agriculture). Using a set of online survey experiments with 1105 US adults, we find that the evaluability of a (negative) outcome generally reduces voting intention, but that the identifiability of a policy worker (administrator) tends to shift blame away from the incumbent politician and thus to increase voting intention. These experimental findings provide at least partial support for our theoretical expectations.

Physics-related companies report mostly mild economic symptoms from COVID-19

Most makers of research tools for physical scientists report stable business. Some of their products are being used in the fight against the novel coronavirus.

Cases and Countermeasure of Indiscriminate TERRORISM

Recently, violence and violent protests such as the political revolution in the Middle East and Africa, anti-social resistance in Europe, and the occupation of Wall Street in the US have been heating up and spreading due to the global economic downturn and the heat of liberalization. Many countries, including the US, UK, and Spain, are experiencing homegrown terrorism, and Korea is also warned of the possibility of homegrown terrorism. In ad-dition, the types of terrorism are changing in various ways due to the rapid development of science and technol-ogy. Biochemical weapons, high-performance bombs, and cyber terrorism, which can kill a large number of lives, are possible, and the development of information and communication technology(ICT) enables close links among terrorist organizations, further strengthening the formation of an international terrorist network. Also, recent terrorism has been indiscriminately perpetrated against an unspecified number of citizens in various ways. In this context, the police s anti-terrorism mission to protect citizens lives and property in the closest place to the people has emerged as an important task. In order for the police to carry out this mission, they must be trained as the first responders at the scene of terrorism, and it is important that they gather information effec-tively and cooperate with various counterterrorism agencies. In addition, efforts are needed to prevent crimes in advance by patrolling areas where foreigners are concen-trated and maintaining proper security. This is because the increase in crime by foreigners could serve as a factor that further destabilizes their status in Korean society. This will be useful not only for the prevention of crime but also for that of terrorism. Furthermore, in order to strengthen the ability to respond to international sex crimes, a joint investigation is essential, including the rapid exchange of information among related agencies and the expansion of information collection. All organizations related to countering international sex crimes, including the police, immigration au-thorities, the National Intelligence Service, the Ministry of Employment and Labor, the Ministry of Foreign Affairs and Trade, foreign diplomatic offices in Korea, and the Small and Medium Business Administration, should es-tablish a close cooperation system to deal with them. As there are cases of fleeing to foreign countries immediately after committing international sex crimes, the government should maintain a system of rapid investigation cooperation with police stations in charge of check-points, airports, and ports to prevent culprits from escaping to foreign countries. As terrorism is a transnational crime that transcends borders, it is essential to exchange information with foreign intelligence and investigation agencies in terms of prevention and response. Finally, it is necessary to establish a social safety net. Securing a safety net to support the lives of the socially disadvantaged and easing inequality through structural reforms are key tasks that Korean society is faced with. Disasters like COVID-19, which has plagued the world, cause more pain for the weak. Disaster is never equal and is harsher for the poor. We need to secure a safety net to support the lives of those at stake and improve ine-quality. Even if the COVID-19 crisis is overcome well, it is likely to deepen the economic polarization and social inequality between the rich and the poor in the future. The distribution of welfare benefits for the vulnerable and the establishment of a new type of governance involving the government, businesses, and labor unions all to cope with the new era are required. This is also a countermeasure against indiscriminate terrorism.

Fourth COVID-19 Spending Bill Includes Funding for Hospitals, Testing

Back to table of contents Previous article Next article Government & LegalFull AccessFourth COVID-19 Spending Bill Includes Funding for Hospitals, TestingMark MoranMark MoranSearch for more papers by this authorPublished Online:8 May 2020https://doi.org/10.1176/appi.pn.2020.5b22AbstractAlthough primarily focused on replenishing the Small Business Administration’s Paycheck Protection Program, the bill also adds to a provider relief fund originally created by the CARES Act. iStock/PgiamPresident Donald Trump last month signed the fourth emergency COVID-19 spending bill, a $484 billion package.Approved by Congress and signed into law in the last week of April, the spending package was mainly intended to prop up the Small Business Administration’s Paycheck Protection Program, which ran out of money earlier in the month following a run on claims for assistance.But the Paycheck Protection Plan and Healthcare Enhancement Act (HR 266) also provides $100 billion in supplemental appropriations to the Department of Health and Human Services (HHS) for the Public Health and Social Services Emergency Fund. This includes $75 billion to reimburse health care providers for health care–related expenses or lost revenues that are attributable to the coronavirus outbreak in addition to the $100 billion approved in late March under the Coronavirus Aid, Relief, and Economic Security (CARES) Act; and $25 billion for expenses to research, develop, manufacture, administer, and expand capacity for COVID-19 tests to effectively monitor and suppress COVID-19.In the run up to the bill’s passage, APA and 11 other mental health and substance use treatment organizations sent a statement alerting Congressional leadership to the urgent need for direct funding to behavioral health and substance use treatment programs from the provider relief fund enacted under the CARES Act. While the spending bill approved last month did not specifically include funding for behavioral health, some mental health and substance use treatment programs may benefit from the funding.HHS posted a fact sheet about the provider relief fund. APA has also posted guidance to practitioners regarding provider relief and other practice issues related to COVID-19 on the APA website (see end of article for links).Meanwhile, APA and other medical and mental health specialty groups continue to work with Congress and the Trump administration to maintain and increase support for community behavioral health programs.“Before the pandemic broke out, there was bipartisan consensus that addressing mental health, substance use, and suicide were urgent national priorities. Congress took preliminary steps to increase funding for mental health and addiction services, but these investments may soon be lost because of the financial strain COVID-19 has taken on our mental health and addiction system,” the coalition said in a statement sent to Congressional leaders last month.Citing a survey conducted by the National Council for Behavioral Health (see story), the coalition noted that many behavioral health organizations “don’t have the funds they need to ride out this crisis.” The survey of 880 behavioral health organizations across the country revealed that 62% believe they can survive financially for only three months or less under current conditions. “Organizations have canceled, rescheduled, or turned away 31% of patients, and 92% have reduced their operations,” they wrote.The statement noted that the CARES Act included funding to health care professionals, with a priority on paying hospitals through Medicare. However, community behavioral health organizations rely primarily on Medicaid and have largely been left out of critical emergency funding. “We urge Congress to dedicate significant resources specifically to supporting community behavioral health programs during the crisis,” the coalition stated. ■The text of the Paycheck Protection and Healthcare Enhancement Act is posted here.Guidance from APA regarding the provider relief fund and other COVID-related practice issues is posted here.The HHS fact sheet about the provider relief fund established by the CARES Act is posted here. ISSUES NewArchived

Economic Impacts of the COVID-19 Crisis: An Orthopaedic Perspective.

Economic Impacts of the COVID-19 Crisis: An Orthopaedic Perspective.

Small Business Administration emergency loans available for nonprofits

In its effort to minimize economic disruption wrought by COVID‐19, the U.S. Small Business Administration is working directly with state governors to provide targeted, low‐interest disaster recovery loans to small businesses and private nonprofit organizations that have been severely impacted by the pandemic.

Express Loans for Small Business: Supplementing the CARES Act

In this brief, propose to supplement the CARES Act by enhancing the SBA Express program of the Small Business Administration (SBA) My proposal is inspired by

Evaluating the effects of Small Business Administration lending on growth

Conventional wisdom suggests that small businesses are innovative engines of Schumpetarian growth. However, as small businesses, they are likely to face credit rationing in financial markets. If true, then policies that promote lending to small businesses may yield substantial economy-wide returns. We examine the relationship between Small Business Administration (SBA) lending and local economic growth using a spatial econometric framework and a sample of U.S. counties. We find evidence that a county’s SBA lending per capita is associated with direct negative effects on its income growth. We also find evidence of indirect negative effects on the growth rates of neighboring counties. Overall, a 10% increase in SBA loans per capita is associated with a cumulative decrease in income growth rates of about 0.02 to 0.03 percentage points.

Control Without Responsibility: The Legal Creation of Franchising, 1960–1980

While the first business organizations to reach large size in the late nineteenth century did so through the route of vertical integration—formal ownership of assets and direct employment of workers—mid-twentieth-century franchising firms pioneered a new path to bigness, relying on restrictive contracts rather than formal integration to control their business organizations. Franchised chains replaced formal ownership and employment with contractual mechanisms known as vertical restraints (contractual controls on separate firms, such as price and supplier restrictions) to achieve uniformity and control over their outlets, without directly owning them. While most existing accounts of franchising focus on efficiency reasons for the evolution of the business form, this paper identifies a policy and legal mechanism: the relaxing of antitrust prohibitions on vertical restraints. These policy and legal changes were heavily lobbied for by franchising firms themselves. Whatever the efficiency implications of franchising, the increasing legalization of vertical restraints also had the benefit for franchising firms of allowing them to pull in the legal boundaries of the firm, leaving workers and other stakeholders outside. At the same time that they pursued franchising as a kind of vertical integration by other means, franchisors lobbied to preserve the legal benefits of having franchisees considered separate firms under a variety of laws, such as access to Small Business Administration loans and exclusion of workers at franchised establishments from access to collective bargaining and other rights against them.

The Weight of Compliance: Anti-Money Laundering Enforcement, Bank Composition, and Lending

We exploit a tightening of anti-money laundering (AML) enforcement that imposed disproportionate costs on small banks to examine the effects of a change in bank composition towards larger banks on real economic outcomes. In response to intensified AML enforcement at the end of 2012, counties prone to high levels of criminal activity in the form of money laundering experience a withdrawal of small banks and increased activity by large banks. This change in bank composition results in an increase in the number of small establishments and real estate prices. Wages and employment increase in the non-tradable sector, consistent with a household demand channel. Increased secured lending through mortgages is one potential driver of this result, whereas lending through the Community Reinvestment Act (CRA) and the Small Business Administration (SBA) are not.

The Rise and Fall of Small Business Enterprises

Small business is universally recognized as the engine of the world economy. It is praised for adding substantially to every country’s gross domestic product (GDP), employment, innovative ability, and tax base. However, the survival rate of small businesses in their first ten years of operation is not high. Only about 20 percent of new business enterprises survive beyond their first ten years. Of those few are referred to as gazelles because they grow fast into medium and large corporations, but many prefer to remain small. This study, which is written to students and potential entrepreneurs, explores the strengths and weaknesses of small business enterprises and the factors that contribute to their success or failure. Hopefully, it would contribute to the literature in the fields of entrepreneurship and small business administration.

МАЛОЕ И СРЕДНЕЕ ПРЕДПРИНИМАТЕЛЬСТВО В РАЗВИТЫХ СТРАНАХ: ОСНОВНЫЕ ОСОБЕННОСТИ РАЗВИТИЯ

In the article a detailed analysis of the small and medium entrepreneurship in the world economy is conducted. The objective reasons for the growth of the small and medium enterprises in the postindustrial society and the influence it realizes on the improvement of the competitiveness of the advanced economies are shown. On the basis of the vast statistical material is proved, that, as a rule, in the countries of the high socio-economic development the small entrepreneurship is effectively stimulated by the public structures. In the article the role of some methods of financial support for small and medium enterprises by the example of the certain countries is studied in details. Special attention is paid to the financial support of the small enterprises in New Zealand since it is the country that has been ranked first for a number of years in the “Doing Business” rating. Special attention in the article is paid to the US experience, because just this country for the researchers as well as for the practitioners is a role model in the field of the small entrepreneurship support. Special place is given to the analysis of the SBA (Small Business Administration) activity – organization, playing a key role in the functioning of small business in USA. In the article on the basis of the information presented the conclusions are made what methods of the small business stimulation could be realized in the Russian society.

Distant Lending, Specialization, and Access to Credit

Small business lending has historically been very local, but distances between small businesses and their lenders have steadily increased over the last forty years. This paper investigates a new lending strategy made possible by distant small business lending: industry specialization. Using data on all Small Business Administration 7(a) loans from 2001-2017, we document a substantial increase in remote, specialized small business lenders, i.e., lenders that originate many distant loans and concentrate these loans within a small number of industries. These lenders target low-risk industries and, consistent with expertise, experience better loan performance within these industries. We then examine whether this industry-specialized lending serves as a substitute or complement to traditional, geographically specialized lending. We exploit the staggered entry of a remote, specialized lender to estimate the impact of specialized lending on credit access. Entry significantly increases total lending, with no evidence of substitution away from other lenders. The results indicate that specialized lending can deepen credit markets by providing new loans to low-risk but underfinanced small businesses.

Following the Money Trail: The Geographic Distribution of PPP Loans

This paper examines the distribution of Paycheck Protection Program loan dollars per employee across U.S. counties, using loan-level data released to the public by the U.S. Small Business Administration (SBA). Our multivariate analysis indicates a positive association between the degree of economic disruption (decline in visits to the workplace) and PPP dollars per employee. This association is especially strong for PPP lending by large banks. Additionally, we find that the PPP loan amount per employee is positively associated with the share of local small business employees at firms with fewer than twenty employees, and this association again is somewhat stronger for large banks. Specifically, we find that a county with twice the share of smaller firms receives 25 percent more PPP loans per employee from large banks compared to another county. This finding is particularly important because of concerns that smaller firms may have had greater difficulty accessing the program. Contrary to those concerns, the findings suggests that smaller firms received more benefit from the PPP program than their larger counterparts after controlling for other important factors.

The Illusory Promise of Free Enterprise: A Primer for Promoting Racially Diverse Entrepreneurship

The U.S. Census reports that Minority business ownership exceeds the corresponding racial makeup of U.S. demographics. Based on these figures, the principle of free enterprise seems to be acting on equal grounds. Could entrepreneurship be the social panacea for abolishing racial biases and the inequality gap? This Essay argues that this parity of Minority entrepreneurship is misleading. The Kauffman Foundation and Small Business Administration most recently reported that Black-owned firms represent only 7% of all U.S. businesses, Asian owned firms represent only 4.3%, and Hispanic-owned firms represent only 10.6%. These businesses typically do not grow or expand, leaving the number of people employed by them relatively constant. Overall, minority- owned firms experience more business failure, turnover, and job loss than traditional businesses. This disparity in American free enterprise is, in and of itself, a source of systemic racism and social injustice. Seemingly, American Minority entrepreneurs are given a false hope of economic independence. In fact, this Essay illustrates that current legal programs destine many of them for insolvency, bad credit, debt accumulation, or, at best, being rendered small and meaningless in the marketplace without the proper tools and opportunities to increase equity and wealth. The Essay concludes by proposing new legal methods to increase dedicated access to capital, networking, guidance, and education for racially diverse entrepreneurs. Specifically, it proposes relaxing bureaucracy, fixing biases in lending, forming racially inclusive networks, and cultivating the role of lawyers as social agents who can inform Minorities about impediments and opportunities to accumulate wealth and economic growth.

A Government-Backed Line of Credit Would Help Small Businesses More Than Current Relief Efforts

In an effort to provide relief in response to the COVID-19 pandemic, Congress charged the Small Business Administration (SBA) with the task of administering a