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An inside look at potential VP pick Kamala Harris' bold plan to give $125 billion in grants to America's most vulnerable businesses, and what to expect if the bill becomes law soon

Kamala Harris

  • California Senator Kamala Harris and Massachusetts Congresswoman Ayanna Pressley have proposed a $125 billion program to support small businesses with fewer than 10 employees.
  • The Saving Our Street bill provides special consideration for minority-owned small businesses, many of whom are being left out of the $670 billion Payroll Protection Program.
  • In addition, since many business owners cannot afford to take on new debt, the plan from Harris and Pressley would provide grants (instead of loans) of up to $250,000.
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As the $670 billion Payroll Protection Program continues to process thousands of applications per day, many of the most vulnerable businesses are still being left out.

What's more, the lack of clarity about the PPP's forgiveness terms has many business owners concerned about using any of the loan proceeds, since they cannot afford to take on any new debt whatsoever. The main concerns voiced among PPP recipients is how to use the required 75% of the funds on payroll within two weeks, during which time most are shut down, in order to qualify for forgiveness.

In response, Senator Kamala Harris and Massachusetts Congresswoman Ayanna Pressley on Wednesday offered a $125 billion plan to establish a "Microbusiness Assistance Fund" to provide grants up to $250,000 to America's smallest businesses.

The Saving Our Street bill provides special consideration for minority-owned small businesses, many of whom are being left out of the current small business relief effort.

As the bi-partisan spirit that propelled the passage of the CARES Act seems to wane on Capitol Hill, the odds of the SOS bill passing could be diminished.

Nevertheless, the bill appears to do a better job targeting the businesses who need the most help navigating the coronavirus recession than the flagship PPP loans.

Here are the most important parts of the proposal.

How big is a 'microbusiness'?

The bill defines eligible businesses as having less than $1 million in revenues and fewer than 10 employees, though businesses in low-income communities may have up to 20 workers. Non-profits are also eligible, but are capped at $500,000 in gross receipts.

Hedge funds, private equity firms, and publicly traded companies may not participate, and applicants must show a 20 percent loss of income during the coronavirus pandemic in order to be eligible for funding.

Who gets priority?

Research from the Center for Responsible Lending shows that PPP loans are not helping minority entrepreneurs. By contrast, this bill sets aside 75% of funds — more than $93 billion — for historically underrepresented businesses.

Who counts as a worker?

The SOS proposal is more lenient than the PPP about who businesses can classify as a worker. In this case a business owner can count full-time, part-time, and independent contractors toward their grant request.

What must the money be used for?

Grant funds may be used only to pay off new debts incurred during the coronavirus pandemic, or to cover wages, benefits, and paid leave in order to retain or re-hire workers during the economic slowdown.

Is a grant recipient eligible for other assistance?

Businesses can get other emergency loans, as long as the additional funds are not used for the same purpose as the SOS grant, i.e. for payroll. At the moment, PPP loans are only forgivable if used on payroll, but new guidance is expected soon.

SEE ALSO: Use this guide to check if your company is a 'small business' so you can qualify for crucial loans and grants to survive the coronavirus recession

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