CAMP HILL, Pennsylvania — Jovita Carranza, the administrator of the Small Business Administration, said you’ll likely not see this in a headline, but small businesses are rebounding. “The momentum is there because I’ve seen it firsthand,” she said.
Carranza sat for an interview with the Washington Examiner both here in Dauphin County, Pennsylvania, as well as in Morgantown, West Virginia, to discuss the impact the Paycheck Protection Program has had on small businesses trying to make a comeback after being shut down from either production or services for months.
She also spent her time connecting community stakeholders, including faith-based organizations, small community lending institutions, and small business owners, so that they understand the monies available to them and how to access them.
Carranza is the daughter of Mexican immigrants. She grew up in Chicago and began her career at UPS on the docks as a part-time package handler. She eventually ascended within the multibillion-dollar company to become its highest-ranking Hispanic female executive.
Carranza became the White House’s point person in April when the pandemic engulfed the bottom line of 30 million small businesses. The Paycheck Protection Program and the Economic Injury Disaster Loan program then became the lifelines to the businesses the agency says account for 44% of the country’s gross domestic product.
It was a moment she never thought she’d find herself in but quickly adapted to. “When I realized that the nation’s economy was just going to shut down … and I’m at SBA, as an advocate of small businesses, it is like, ‘Where do you start?’” She rolled up her sleeves and got on with the business of pulling all of the necessary tools together to make the multiagency endeavor flow.
“I never thought that I would be an administrator of an agency that would have access to capital resounding in our nation for 30 million small businesses,” she said. “And that we would have a president that considered small businesses that vital to the economy. And so, it’s been a real honor and a real privilege to be at the helm.”
While progress is ongoing and the hope is for more capital, she said there have been difficulties for some small businesses that found themselves days into reopening, only to be hit by riots and protests.
“There’s definitely a setback,” she said. “They were very compliant and opening up, based on phases that the governors established, that the president was also giving guidance on from a distance. They were gaining traction. And then, all of a sudden, they had the boards up. Or there was some vandalism, where they lost even greater amount of property and revenues.”
In both Pennsylvania and West Virginia, Carranza stressed in the interview the importance of the intersection of faith-based communities with lenders and business owners, the prospect of additional PPP loans, and how prepared they are if there are additional shutdowns. This transcript has been lightly edited for clarity.
Jovita Carranza: First, when I took on this role, I said I was planning to travel to all 52 offices, but things have changed since then, since we last met.
There was the coronavirus pandemic: It became a national issue, and then, it became a medical issue, and then, it impacted our economy.
And when I realized that the nation’s economy was just going to shut down … and I’m at SBA, as an advocate of small businesses, it is like, “Where do you start?”
Our mission is to provide access to capital. I never thought that I would be an administrator of an agency that would have access to capital resounding in our nation for 30 million small businesses. And that we would have a president that considered small businesses that vital to the economy. And so, it’s been a real honor and a real privilege to be at the helm.
Washington Examiner: The president spoke about small businesses recently and how much capital has been distributed. Can you please go over what that means?
Carranza: I started a grand tour three weeks ago. I went to North Carolina, took a week to retool some of the automation that we have because we still have funds available for small businesses to apply for. And so, once I felt confident that I could go back on the road, I visited last week, Dallas. And then, I said, “Every week, I want to travel.”
There are certain days of each week to travel to various states because I want to visit with the small businesses and the lending community, as well as some of the local officials, so that everyone understands that the Paycheck Protection Program, the PPP as you know it, is taking hold and that we’re realizing the twofold objectives that we had for that program.
One, that the small businesses are optimizing the emergency funding that they received. Secondly, that they’re actually bringing back their employees both in North Carolina, as well as in Dallas.
And now, here in Pennsylvania, I’ll be able to visit with the small businesses. I’ve already met with about 15 community lenders and local officials, also with an emphasis on faith-based and non-for-profit organizations. The storyline that I’ve experienced has been so motivating and so encouraging that the economy is — you won’t see this in a headline, but the momentum is there because I’ve seen it firsthand.
In North Carolina, I visited faith-based groups and met with the First Baptist Church, the megachurch. And they were recipients of the PPP. They shared with us that with their funds, they were able to bring on board their staff, plus other employees to be able to distribute food to the needy. They went from 200 to 2,000 meals. And it’s growing.
One small business that I visited in North Carolina was an African American electrical engineering firm. He used both the PPP program, as well as the idle Economic Injury Disaster Loan program. He leveraged one to reduce the credit debt he had, very expensive. Fixed his credit debt. And then, he used the PPP to bring his employees in. Then, he introduced them to the engineers. That’s why to me, those funds are actually gaining momentum in the market.
Washington Examiner: Please explain why it is important to have that relationship between small community banks, small lenders, and the communities that they serve, in helping PPP to be successful.
Carranza: The fact that these 15 banks and several others that I’m going to meet today in Pennsylvania have a common issue and that is knowing how to protect these small businesses moving forward, what kind of further assistance should they be providing them because these are new clients for them. They now have some of the most sophisticated depositors and clients that our market can attract. This is almost like a lending community panacea.
You have individual small businesses that understand business. They understand being in the red. They understand profitability. They understand customer satisfaction. They understand how to market their product … no differently than a banking business model. Definitely, there is a relationship that’s aligned with the same objective — profitability and also community enhancement, as it relates to the local economies. It’s been quite rewarding and definitely, the realization that SBA has a greater role now, to try to bridge the newly appointed or authorized lenders bridge, that relationship and understanding of their newly acquired small business client.
Washington Examiner: What were some of your earlier challenges when everything started exploding, when businesses started closing, when the country started closing down, and what have you learned from them if we face this again?
Carranza: There’s so many. Where do I start?
The first challenge was understanding how many resources I was going to have available to work with. That is to say, the leadership at the agencies, because every agency had employees that were teleworking and I have almost 2,000 executives that are very experienced, there’s significant institutional knowledge. I understood that the skill sets were now shelter-at-home or didn’t have perhaps the automation available to really be effective or efficient in communicating with their employers or any agency for that matter. I had to first identify, “What resources do I have available? And how do I mobilize them as a unit to now not only accept the funds but work all of the systems to either extend the communication with the lenders, as well as the local chambers?”
And every time that we identified a new … firm or association or entity that was going to be able to take advantage of the PPP, it was a new dynamic for SBA because we have statutes. We have a 7(a) program, and it has certain statutes, certain guidelines, and parameters. And now, we have this PPP. Retrofitting that new program into what we have as flagship programs was an integration, as well as a dissemination, and then an execution. It was quite an undertaking. As a leader in any particular organization, you have to step back and understand the capacity of your resources.
And that was a 24-hour assessment. That’s as much time as we had because, as you recall, we were tasked by this president. And when I say we were tasked, SBA was tasked with implementing and distributing these funds through newly acquired banking relationships. The known lenders to SBA were about 1,800 authorized lenders, but half of them were inactive. We had to reactivate those and then accept new ones. And there was a coordination. That’s when the coordination with the Treasury Department occurred. Every lender that applied to become a PPP lender, then had to fill out an application. Then, that was reviewed with Treasury, who gave the final approval. And then, it was training. And then, there was outreach. And then, there was guidance.
That process was like almost building a plane while you’re flying. However, we had highly talented engineers in the process, and I knew we could pull it off, given the appropriate time and support, which we did. If we needed to augment our technology and we needed rapid installment of engineers, there were various contractors that stepped up and put SBA as their priority. From equipment to engineers to resources to just connectivity with their headquarters, it was made available — and very quickly. Every agency was strapped for resources as well, so we couldn’t rely heavily on each other. However, there was definitely some interagency support. FEMA came through — they allocated resources for us because they have experience in loan processing. And they understand SBA based on our Office of Disaster Assistance.
I’d like to go back with a question that you had concerning the small business community and the newly acquired lenders. In addition to integrating those new vendors and providing all the guidance for them, we had 30 million small businesses who were asking, “Who’s SBA? How do we even connect? I don’t bank. I deposit. I have a credit card. I don’t even know who my community lending partner is or should be.”
The community banks were so agile, so adaptable, and so connected to the small business community, they were the first ones out of the box.
That’s why we had a high number of low-value loans initially and why the community banks were so strong in their delivery of funds, while the larger banks were retooling their systems and also developing their resources no differently than SBA. And so, of course, they already had their regular clients, and so obviously, they took care of them as well. The community banks took care of their local clients and were able to acquire, through word-of-mouth referral systems, able to take on new clients. But they also had a capacity issue. It was very interesting, Salena, when on a Sunday, I’m talking to a global bank, and their CEO said, “I never thought I’d have my sleeves rolled up, underwriting loans.”
And I had to laugh. I go, “I never thought I’d be talking to a bank CEO on a Sunday about what we’re doing behind the scenes to support this particular bank.”
Washington Examiner: One of the challenges I have found within the Latino and African American communities is the lack of trust with banks. Can you talk about any of the challenges you had with that and instilling faith in that institution?
Carranza: We knew that we had to develop some very strategic outreach systems, not just communication systems, from webinars to teleconferencing. Remember, all of this is being developed because typically, we hold conferences. We hold workshops. We do outreach with chambers. We see each other.
The chambers call us, and we attend their events, and there’s breakout sessions and things and such. We had to do all that virtual now. And so, we did have to develop these communication distribution systems. Also, call on all of our known advocates, such as the chambers of commerce, whether they were the Hispanic chambers, whether they were women chambers, whether they were women’s trade associations or non-for-profits. They all wanted to know, ‘How do we access these funds? Who should we work with?’
And we would obviously direct them to sba.gov, and we were building out and expanding with greater information. There was no one system that was not being built out to support the small businesses and the lending community. We went from 1,800 banks to 5,400. And the diversity of the lenders was really unique. One, you had the global banks. Then, you had the community banks, known entities. And I’m going to get to the demographics in a moment.
Then, we had the fintechs (PayPal and other financial technology companies). Then, we had Community Development Financial Institutions. Then, we had the minority depository institutions. And then, we had the Commerce Department knocking at our door. And then, we had the USDA, who also had needs for the farmers, but they’re all unique. They’re all unique systems and cultures and clients.
And so, we had to develop materials and communication systems. We had designated certain individuals that had certain skill sets. For instance, I tasked someone that I detailed from the Treasury Department to work specifically in the community that you were just referring to, the underserved community. And I also tasked someone from the Consumer Financial Protection Bureau. And they also monitor if we are reaching the smallest of the smallest businesses, the sole proprietors, the independent contractors. Every community, the Hispanic, the African American, the Asian.
And if you recall, it was the Asian community that got hit the hardest in their restaurants, their entertainment, and their hotels. And so, that was a unique demographic that we needed to make sure we supported. And they are not traditionally accessing all banks. It’s their own community banks.
Washington Examiner: Since some of the protests happened, there have been small businesses that were destroyed or vandalized. Has anybody talked to you about their concerns going forward? Is there something that they’re worried about?
Carranza: There’s definitely a setback. They were very compliant and opening up, based on phases that the governors established, that the president was also giving guidance on from a distance. They were gaining traction. And then, all of a sudden, they had the boards up. Or there was some vandalism, where they lost even greater amount of property and revenues. Yes, that was a setback for all of us. That was totally unexpected. And they’re trying to recover from that. Some of them believe that they were very blessed because some of the civil unrest came up to the corner, and then, they made a U-turn and went back, and they were so grateful that they were squared, but that didn’t happen for everyone. Yes, it has been a setback of about two to three weeks. In some cases, they’re still boarded up.
Washington Examiner: Explain why community banks were so critical in the distribution of the PPP monies.
Carranza: The community banks were the most responsive. They were the most adaptable and agile, and they are the closest to these small businesses in their particular community. So, a lot of them are on text and a first-name basis with their customers. And so, it was easy to embrace this Paycheck Protection Program funding for these particular small businesses. So, they embraced their current customers, their clients. And then, they had to learn how do I engage … 70% of their PPP were new entrants to their banking system. So, they had to provide technical assistance. They had to reinforce their staffing, augment their staffing in order to accept these new applicants. Two things: They didn’t know anything about their bank, and they also didn’t know anything about SBA. So, they had to introduce them to the SBA PPP model, as well as introduce them to the banking, their particular entity.
So, the bankers had said they also augmented their staffing and their technology and developed some outreach and were working 24/7, no differently than SBA. So, it was a whole community, just like the president had the whole government providing support for the small businesses. And the small businesses now, Salena, are so pleased. They don’t want to lose their place in the market because of such significance that this administration has placed, so much support, as well as the lending community now establishing a new, important relationship with them.
Washington Examiner: How important is it for there to be another CARES Act or a more PPP funding? What’s next?
Carranza: We’re working very, very hard, long and hard and strategically on how to deploy the remaining $129 billion. That’s one of the reasons why I met with the lending community. In this particular visit, it was about 15 from the smallest to the largest community banks, from credit unions to Community Development Financial Institutions to your regular community bank. And I urged them to continue providing outreach and then attracting new clients through word of mouth, through their chambers of commerce, through just their own mechanism that they put in place now that they’re very familiar with the PPP program and have established a deeper relationship with SBA. We would be there also to assist them if they needed to conduct either training webinars or some form of connectivity with the small business community to attract not only small businesses, but non-for-profit groups.
These lenders admitted that they had extended their loan portfolio, the PPP, to their local churches, their faith-based community. At that time, we had 12 days remaining for them to access the remaining funds in the PPP program. And so, they said they would. They said they were going to try to work just as hard to attract new clients now that they understand the program better. So, that’s the goal.
Washington Examiner: What has been the challenge in rural areas, places in the Midwest or Appalachia or out West, as well as in the black and Latino communities not having an understanding that they have this ability to access this money?
Carranza: That’s a great question, Salena. Not only did we discuss that with the lending community, but here in West Virginia, it’s a rural, very extended area and they don’t have — I mean, it’s not a bank desert, but they don’t have the number of community banks or Community Development Financial Institutions. I believe you can count them on one hand. Currently, there’s about 16,000 small businesses in West Virginia that were provided PPP funding, and that totals a little bit over a billion dollars. So, there’s more opportunity there because West Virginia has about 103,000 small businesses. So, what are we doing for those other businesses that have either lack of knowledge of SBA or, for that matter, lack of knowledge of the PPP program in general? It’s going to take the lending community, the media, as we’re doing today, to really get the word out.
At SBA, we’re being very aggressive. Just today at about 1 p.m., I’m going to do a pre-call because at 5 p.m., I’m going to be connecting with about 2,000 to 5,000 (depending on who signs up) faith-based and non-for-profit organizations to communicate what’s remaining in the PPP program, the funds, and the technical assistance that SBA can provide and the outreach within every district office, in every state, which we have about 60 offices that they can access.
Washington Examiner: Faith-based: Explain how important that is, because they’re the most trusted member of the community to get that word out. Is that correct? Is that why you work so much with the faith-based community?
Carranza: I’m not only working with the faith-based communities from a virtual perspective, I’m actually inviting them to these roundtables. So, they’re sitting right beside a small business, as well as some of the lenders in the community. And it’s important because they provide very important services in the community. And many of the members of these churches are small businesses. They’re sole proprietors, independent contractors. So, they’re a whole community that could provide some outreach for us from [an] SBA perspective. I’ve visited megachurches, both in North Carolina, Dallas, and I’m hoping to do that in Virginia as well. Why? Because their memberships are huge. They also have members that have small businesses. They provide either childcare, community care, food banks. They are so essential in the community. And as you know, PPP was designed to protect and sustain small businesses and for small businesses to be able to retain their employees. That’s why it’s so important that access to these funds be done immediately.
Washington Examiner: What percentage of businesses in America are small businesses?
Carranza: There’s about 31 million small businesses. At SBA, as I mentioned at one point, we probably have touched about 11 million of those small businesses at SBA. At some point in the past two months, we have processed either a loan by assigning a loan number through our office of capital access or through our Economic Injury Disaster Loan COVID, our disaster office, where we’ve processed some loans as well there. So, in one portfolio, the Paycheck Protection Program Office, we’ve probably managed about 4.5, 4.6 million small businesses. And then, through the Economic Injury Disaster Loans, we’re now up to 6 million small businesses.
Washington Examiner: How important are events like this in rural places like here in West Virginia or the ones in Dauphin County, Pennsylvania?
Carranza: No state or region is too small or too far to visit. My goal is to visit with the lending community because they became the partners. They became the extension of SBA. They became the distribution channels for over a half a trillion dollars’ worth of relief, immediate relief. There’s the faith base. There’s over 400,000 institutions, and I’ve only visited three states’ worth just yet. I mean, I’m still planning on my next trip. We can’t travel far enough or fast enough to these particular locations. I’m here to visit with the small businesses to learn how this Paycheck Protection Program assisted them in sustaining their businesses. And as well as how are they retaining their employees? How are they paying them? Because I really want to understand, so that as we prepare for perhaps an uptick in the fall, how can we partner with small businesses to prepare them for the next surge or any pandemic that faces us?
We thought natural disasters was a huge undertaking. Compared to this national stop, I mean this economy, half of the GDP is reliant on coordination with the Treasury Department, as well as SBA’s efforts, as well as trying to transition and reconstitute our own employees back into their offices. We’re only on phase one right now in bringing our workforce back.
Washington Examiner: Are you getting any sleep at all?
Carranza: Who can think of sleep? I’m so antsy to speak to the lenders and to the small businesses. It’s an adrenaline high that I just hope it doesn’t stop because there’s such a dire need. The fact that we realized 2.7 million, 2.5 million employees returning to the labor market was just a testament of all of our efforts because that liquidity really assists the small businesses in returning.
