Winners & Losers in the Small Business Paycheck Protection Program

Today the Small Business Administration and Treasury Secretary Mnuchin announced the initial budget of $350B for the Small Business Paycheck Protection Program is exhausted.  While Congress debates if and how to replenish the budget, it makes sense to take a quick look at where the money went and assess which states were winners and losers in the great pandemic disbursement.

The publicly available data^[1] remains fairly high-level, but by combining basic small business data from the Census and the Bureau of Labor Statistics and a clever index, it’s pretty straightforward to characterize where the dollars landed.  There is not enough information to discern if the monies were intentionally directed, but there is enough to call for significant follow-up analysis when the data does become available.  Federal dollar disbursements have, for better or worse, political implications and it’s best to understand them before disbursing more.

Here’s the money shot:

Here’s how I got there.

First, the high-level view.

$342 billion was provided to nearly 1.7 million small businesses in all 50 states plus the District of Columbia and five territories.  Approximately 27% of the nearly 6 million US small businesses with 1 to 500 employees received monies.  Anecdotally there is significant demand from the remaining small businesses to participate.  

Now, where’d the money go?

The state-by-state data reveal significant disbursement ranges across three key metrics.  

First, what percentage of small businesses in a state actually got a loan?  While 58% of North Dakota’s small businesses received support, only 15% of those in California did the same with a national average of 27%.   I call this the Participation Rate.  

Second, how many dollars landed in each state relative to the number of small businesses in that state?  This is a “per capita” metric which accounts for the variety of small business distributions across states.  Again, the metric varied widely, with Hawaii ranked highest at $83k per business and Florida lowest at almost $40k against a national average of $56k.  

Third, how many dollars landed in each state relative to the number of employees in a state’s small business sector?  This is another per capita metric, and perhaps the most important given the program’s intent to support PAYROLL checks across small businesses. This metric also displays a broad range, from Nevada’s low of $4k per employee to North Dakota’s high of nearly $8k against a national average of $5.6k.  

So when I stack rank each of those three metrics, do a simple addition of each state’s rank on each metric and total them up, I see North Dakota on top and Nevada on the bottom.  Put all that on a map and you see it above.

Now any map published today quickly gets politicized and compared to the 2016 Presidential Election Results map.  That is not my intent here.  I’m really looking for systemic bias in a complex program that ramped up very quickly.  

Having said that, there are three important political questions to answer in this hyper-political environment.

Did Trump states fare better than Clinton states?  Yes.  States that voted for Trump in the 2016 election received 15% more loan dollars per small business than Clinton states, $60k vs $52k per business.  And Trump states received 8% more dollars per small business employee than Clinton states received.  

Did “swing states” receive more than solidly blue or red states.  Yes they did — 5% more as measured in either dollars per small business or dollars per employee.

Did states with Republican governors fare better than states with Democratic governors?  Yes.  Republican governors received 11% more per small business, and 9% more per small business employee than their Democratic colleagues.

Does all this mean the $350 billion was disbursed with political motivation and conspiracy?  No, the data do not support such a claim.  Still, disbursement of federal dollars absolutely has political impact and the extent to which it favors certain geographies over others cannot be ignored.  I have no evidence to suggest a political conspiracy directed to this result, but a proper post-program analysis I believe is warranted as these distributions don’t seem “random”.  In fact, Congress should review these results immediately so any next funding round may adjust for any systemic bias.  To that end, here’s the questions I’d ask…

1. Is Congress satisfied with the relative disbursement of these funds?  Does the wide range across these metrics make sense?
   I think not.  If the goal is to stabilize paychecks for small business employees, it seems to me that the per capita by employee distribution should not range from $4k to $8k.  I’d target no more than a 25% discrepancy for this metric.  To get there we need more data about the number of employees of those companies that did receive funds versus those that did not.  
   Similarly, Participation Rate ranged from 15% to 58% of a state’s small businesses received a loan.  That metric should be within a 10 point margin.
   
   
2. 4,664 banks participated in the application and disbursement process of the Paycheck Protection Program.  That’s a lot of banks to ramp up in mere weeks to a brand new program.  It’s time to assess before doubling down.  To what degree does the banks’ own geographic distribution and physical ability to process the loans impact the resulting distribution?  What new coverage should be put in place to improve the distribution?  And to be clear, we need to choose banks not in an effort to be fair to banks, but in an effort to serve the program goals best … ensure small business employee paychecks can continue during the health crisis.

The program was necessarily and understandably rolled out quickly and without full awareness, with an ability to learn adapt along the way.  We’re on the path to doubling the funding next week.  Let’s do so with reference to the core goals in a measurable way.

Data Appendix

SBA Paycheck Protection Program Report
as of April 16, 2020
Plus Data from US Census and Bureau of Labor Statistics 

Total # Loans	1,661,367
Total Dollars	$     342,277,999,103
Average Loan Amount	$   206,022
Loan $s per All Small Businesses in US	$     56,452
Loan $s per SmallBiz Employee	$       5,652
%age of All SmallBiz Receiving Loans	27%

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This table requires wider-than-a-phone screen to read comfortably.

Geo	# of Approved Loans	Approved Dollars	Avg Loan Amount	%age of Business Receiving Loan	Loan Dollars per  Small Business	Loan Dollars per SmallBiz Employee	Cumulative State Rank
AK	4,842	$921,927,504	$190,402	29%	$ 55,868	$   6,716	23
AL	27,922	$4,862,690,120	$174,153	39%	$ 67,797	$   6,056	16
AR	21,754	$2,722,726,557	$125,160	44%	$ 55,465	$   5,549	30
AZ	19,280	$4,846,959,062	$251,398	18%	$ 45,511	$   4,548	47
CA	112,967	$33,413,693,192	$295,783	15%	$ 44,113	$   4,625	49
CO	41,635	$7,392,960,359	$177,566	31%	$ 54,245	$   6,481	31
CT	18,435	$4,151,934,451	$225,220	27%	$ 60,240	$   5,572	36
DE	5,171	$1,090,415,848	$210,871	27%	$ 57,267	$   5,824	33
FL	88,997	$17,863,199,837	$200,717	20%	$ 39,838	$   5,112	44
GA	48,332	$9,464,475,442	$195,822	27%	$ 53,656	$   5,641	38
HI	11,553	$2,046,450,982	$177,136	47%	$ 83,311	$   7,417	2
IA	29,424	$4,315,688,444	$146,672	48%	$ 70,477	$   6,642	5
ID	13,627	$1,850,034,026	$135,762	35%	$ 48,113	$   5,687	32
IL	69,893	$15,972,578,071	$228,529	28%	$ 63,467	$   6,448	25
IN	35,990	$7,491,445,351	$208,154	34%	$ 70,412	$   6,077	15
KS	26,245	$4,288,652,108	$163,408	47%	$ 77,020	$   7,087	4
KY	23,797	$4,149,467,684	$174,369	37%	$ 64,067	$   5,824	22
LA	26,635	$5,100,534,501	$191,497	34%	$ 64,447	$   5,635	26
MA	46,937	$10,360,907,178	$220,741	33%	$ 73,627	$   6,871	11
MD	26,068	$6,537,733,687	$250,795	24%	$ 61,092	$   5,658	34
ME	14,993	$1,944,425,549	$129,689	45%	$ 58,822	$   6,617	13
MI	43,438	$10,381,310,070	$238,991	25%	$ 60,804	$   5,486	37
MN	46,383	$9,014,060,040	$194,340	40%	$ 77,381	$   7,160	6
MO	46,481	$7,547,822,023	$162,385	41%	$ 67,221	$   6,486	12
MS	20,748	$2,481,000,606	$119,578	49%	$ 58,136	$   5,674	21
MT	13,456	$1,470,300,136	$109,267	42%	$ 46,092	$   5,983	28
NC	39,520	$8,005,752,270	$202,575	23%	$ 46,019	$   4,679	42
ND	11,002	$1,548,384,035	$140,737	58%	$ 81,990	$   7,928	1
NE	23,477	$2,988,890,489	$127,311	56%	$ 70,946	$   7,244	3
NH	11,582	$2,006,858,477	$173,274	39%	$ 68,140	$   6,676	10
NJ	33,519	$9,527,794,260	$284,251	18%	$ 49,808	$   5,189	41
NM	8,277	$1,424,408,711	$172,092	25%	$ 43,289	$   4,193	46
NV	8,674	$2,013,939,889	$232,181	17%	$ 40,018	$   4,003	50
NY	81,075	$20,345,681,101	$250,949	18%	$ 44,154	$   4,950	45
OH	59,800	$14,108,889,927	$235,935	33%	$ 78,495	$   6,471	14
OK	35,557	$4,615,708,450	$129,812	50%	$ 65,320	$   6,499	8
OR	18,732	$3,806,104,476	$203,187	20%	$ 41,062	$   4,369	48
PA	69,567	$15,697,648,689	$225,648	31%	$ 69,535	$   6,247	19
RI	7,732	$1,335,777,801	$172,760	33%	$ 57,873	$   5,828	29
SC	22,933	$3,807,578,397	$166,031	29%	$ 47,369	$   4,660	40
SD	11,324	$1,369,616,339	$120,948	53%	$ 63,768	$   6,541	9
TN	34,035	$6,542,045,089	$192,215	35%	$ 68,115	$   5,857	17
TX	134,737	$28,483,710,273	$211,402	31%	$ 65,248	$   5,973	24
UT	21,257	$3,695,399,459	$173,844	33%	$ 57,319	$   6,259	27
VA	40,371	$8,721,170,223	$216,026	27%	$ 58,227	$   5,598	35
VT	6,983	$1,000,127,478	$143,223	40%	$ 57,965	$   6,357	18
WA	30,421	$6,959,680,159	$228,779	20%	$ 45,641	$   4,957	43
WI	43,395	$8,317,705,842	$191,674	41%	$ 78,277	$   6,564	7
WV	7,861	$1,351,223,328	$171,889	31%	$ 53,122	$   5,008	39
WY	7,618	$837,018,372	$109,874	44%	$ 48,293	$   6,494	20
DC & Terr	6,915	$2,083,492,741	$251,683	N/A	N/A	N/A	N/A
US	1,661,367	342,277,999,103	$206,022	27%	$ 56,452	$   5,652

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^[1] Small Business Administration, Paycheck Protection Program Report through April 16^th referenced in SBA Press Release Number 20-33.