Good news for small businesses during the COVID-19 pandemic: a recent study by the Federal Reserve Bank of San Francisco found that small business lending actually increased during the pandemic. The study analyzed data from banks participating in the Small Business Administration’s Paycheck Protection Program (PPP) and found that lending to small businesses increased by $700 billion in the first six months of 2020.
The PPP, created by the U.S. government as part of its COVID-19 response, provided forgivable loans to small businesses to cover payroll and other expenses. According to the study, the PPP stimulated an increase in lending to small businesses. Thanks to it, many banks increased their lending activities and made it possible for business owners hitted by the pandemic to get much-needed financial assistance.
However, the study also noted that the increase in lending was not evenly distributed across all businesses. Larger businesses with existing relationships with banks were more likely to receive PPP loans than smaller businesses. Additionally, businesses in low-income areas and businesses owned by people of color were less likely to receive PPP loans. This highlights the need for equitable lending practices.
Despite these challenges, the study’s findings offer a glimmer of hope for small businesses during these uncertain times. As the economy continues to recover from the pandemic, small businesses will need continued support from lenders and government programs to thrive and rebuild.