After several days of uncertainty surrounding the 2020 United States presidential election, the press began to project a Biden administration for January 2021. A new presidency means new policies—especially when it comes to the economy. As businesses small and large continue navigating the challenges of the COVID-19 pandemic, delivering financial relief and spurring economic recovery are paramount.
Small businesses are looking to lenders and community banks to provide much-needed capital to help them keep doors open. But across the lending industry, the number one question is just how Biden’s policies will play out.
A new small business fund
PPP loans delivered to far fewer small businesses than expected—and nearly 84% of those businesses have long since exhausted the funds they received. The Biden administration plans to create an ongoing program where additional funds will be distributed to community banks and lenders to provide capital for employee payroll and fixed costs. The program will work to prioritize the businesses that need relief most, and provide relief in some form to all qualifying businesses. The administration also proposes an auditing process to ensure funds are being distributed to businesses that genuinely need it.
Increased protection, programming, and hiring for small businesses
The new administration promises to introduce a multi-pronged approach to increase and prioritize the employment opportunities and resources available to small businesses. One measure to support this is increasing the federal procurement of “small disadvantaged businesses” for contracting opportunities. Additionally, the administration plans to channel resources into small business incubators, programs focused on minority- and women-owned businesses, and the introduction of tax breaks for small businesses who offer employees retirement savings programs.
New investments in infrastructure
Infrastructure is intertwined with the economy—and Biden’s plan includes revitalizing national and regional infrastructure. The plan addresses transportation, transit, green energy, and water investments. Along with this programming, the plan will double funding for the Economic Development Administration, which will support residential and business areas of underdeveloped communities and help local leaders apply for and obtain federal aid. Finally, Biden intends to establish state-level small business grant programs with upwards of $5 billion of funding going to states that participate. Under this plan, lenders in qualifying areas may see the circulation of additional funding to support small business development.
The bottom line
Small businesses need support now more than ever. Though only time will tell how many of these proposed policies come to fruition, it’s clear that small business funding is not an afterthought of the new administration’s platform. If all holds true, lenders and community banks can expect to see more governmental programming and support for small businesses—especially as the economy rebuilds from COVID-19.