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PPP: Who’s screwing small businesses most – SBA, politicians, or banks?

(BUSINESS NEWS) With another round of PPP (Paycheck Protection Program) being finalized, entrepreneurs wonder if they’ll get screwed yet again (they will).

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If you’re a small business owner, freelancer, solopreneur, or entrepreneur who has built a company that isn’t publicly traded, there is a chance you applied for Paycheck Protection Program (PPP) relief, a $349 billion program designed to benefit businesses that can’t obtain credit elsewhere or who are underbanked.

And you’re meekly asking around to see if you’re the only one who got the dreaded “we ran out of money” email from your local bank after you jumped through several hoops to apply into a black hole with no responses or returned phone calls.

The $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act unanimously passed in the Senate on March 25, and signed by President Trump on March 27. The Act includes the PPP which gave Americans hope in the form of 2-year loans of up to $10 million for companies with under 500 employees, forgivable if applied to payroll, mortgage interest, rent, and/or utilities.

Meanwhile, over 40,000 Americans have died from COVID-19. It’s hard to be outraged under these conditions, but people are angry. Sure, some are violating stay-at-home orders to protest, but I don’t believe it’s simply because the economy is frozen, but because we were all given a false sense of hope. The PPP was thrown into choppy waters as a life preserver, but it was never intended for actual small businesses. The growing anger is from entrepreneurs and freelancers embarrassed to ask others if they’re the only ones to get rejected.

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The truth is that most were rejected. And now carry that pit of fear in their stomachs, which is blossoming into anger. Sure, President Trump said that companies will have to “return” funds if they were “inappropriate,” given how many major institutions got funds, but that doesn’t help anyone today.

Politicians are nearing a deal on the second round of PPP, but small businesses are confiding in each other that they don’t believe they’ll receive help this time, either. With roughly 700K pending applications, and an estimated $310 billion which could become available in the second round of PPP, that rounds out to $442K per applicant, but will the cap remain in the millions, edging out smaller companies? Again?

There is a growing sense of dread and jadedness in this community that is becoming contagious as we compare notes (all of which look suspiciously similar).

If your local politician doesn’t understand how the entrepreneur community views them right now, show them this quick (but poor quality) clip from The Campaign:

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You may think the growing outrage is because there are so many open mouths right now expecting the government to swoop in and feed them, but that’s not it. The rage is because once again, the little guy got screwed.

Under the PPP, Harvard University received $9 million, and responded to the public outrage by promising to apply funds to financial assistance to students. That’s neat, but what does that have to do with paycheck protection!? It’s literally in the name of the damn program. They have the largest endowment in the nation, sitting at a sweet $49.5 billion, so you can see how a copywriter in Dallas whose landlord is waiting to be able to file eviction is frustrated.

Under the PPP, according to recent Securities and Exchange Commission (SEC) filings, 71 publicly traded companies received emergency funding. SEVENTY. ONE. You can see how a 10-person graphic design firm in Nashville is frustrated.

Under the PPP, Ruth Chris Steak House (who has a $250 million valuation and 150 locations) received $20 million. They said in a statement that they applied so they can be “well positioned to emerge from this situation a strong and viable entity.” Are you effing kidding!? Please tell that to the day care operator in Kansas City who already laid everyone off and was told by politicians that the PPP was their lifeline. Strong and viable? Small businesses just want to stay open.

Under the PPP, Potbelly sandwich shops received $10 million despite having over 400 locations and an $89 million valuation. SEC filings also indicate that Kura Sushi USA received $6 million, Fiesta Restaurant Group (operating Taco Cabana and Pollo Tropical) snagged $10 million, and J. Alexander’s Holdings received $15 million for their 47 restaurants in 16 states.

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Notice a trend here?

Shake Shack made a public splash by giving back the $10 million they received under the PPP, noting they had access to other funding, given that they have a $16 billion valuation, 7,600+ employees, 200 of whom were already laid off, and roughly 800 furloughed. The company explained that they applied because the CARES Act allowed any restaurant with under 500 employees per location to qualify.

Did you catch that? ALL RESTAURANTS WITH UNDER 500 EMPLOYEES PER LOCATION QUALIFIED. How many single restaurant locations do you know of that employs over 500 people?

Shake Shack accidentally explained why the first round of PPP failed. It was never designed for small businesses, and especially not for freelancers or gig workers as politicians had so optimistically promised.

False hope.

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Meanwhile, you have JPMorgan Chase bragging that they gave out more PPP funding than any other bank. Credit unions and small banks aren’t processing the same volume, and it is unclear as to whether the SBA is favoring large banks, large accounts at large banks, or if the little guys just took too long to figure out how to get help for their customers. But what is clear is that banks have gotten paid, as $6 billion was given to banks processing PPP funding. Did the SBA favor large companies, or did banks?

Either way, banks got paid billions. Smaller account holders did not.

Also frustrating, the Small Business Administration (SBA) refusing to be transparent about who the PPP recipients are, whereas SBA loans are typically public information (company names, executives, addresses, etc.) and they say only nominal amounts have funneled down to hospitality, in clear conflict with reality. Further, few have received aide under the SBA’s Economic Injury Disaster Loan (and grew frustrated at conflicting information ranging from large amounts available, to $10K grants, to maybe only $1K per employee).

It remains unclear who is screwing the little guy here – politicians, the SBA, banks, or all three simultaneously.

Small business owners Duncan and Rita MacDonald-Korth started a petition calling on the second round of PPP funding to be limited to companies with under 250 employees, and that half of all funding be reserved for those with under 50 employees. They call the first PPP round “flawed from top to bottom,” having done “very little to help genuine small businesses and instead has benefited large companies who have used subsidiary entities to benefit disproportionately and unfairly.”

Companies are banding together to sue Wells Fargo, Chase, and U.S. Bank claiming the banks “front-loaded applications for larger loans and focused on loans for $150,000 and under at the tail end of the program before it lapsed.”

Sure, you have companies like software company 75F in Minnnesota who have gained attention for publicly rejecting the help they applied for, but given the $18 million they raised in venture capital funding last year, solopreneurs are quietly reading that headline from home, wondering if they’ll ever be in line for help if companies like that qualified for PPP.

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On Twitter, Senator Marco Rubio (R-FL), chairman of the committee overseeing small businesses, has softened over time, now saying that the PPP wasn’t designed to reach multiple subsidiaries of a national brand, and that “should be corrected.”

Should be corrected? You’re damn right.

There is growing fear which breeds anger, and actual small businesses are getting screwed, thinking they’re alone in their failure.

With the PPP’s lack of transparency and misallocation of funds to massive businesses, it is no wonder people are enraged. People are realizing they’re not the only one feeling betrayed by this false sense of hope, and we’re seeing entrepreneurs begin to compare notes. Trouble is brewing.

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Lani is the COO and News Director at The American Genius, has co-authored a book, co-founded BASHH, Austin Digital Jobs, Remote Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

8 Comments

8 Comments

  1. Greg B

    April 22, 2020 at 4:47 pm

    As a CPA who has assisted clients with these PPP applications, I’m not sure if it is actually rejection or that the banks are simply letting the smaller loan requests expire once the SBA funding dries up.

    The banks will receive more fees for the larger loans which provides their incentive, but they are also exercising their standard underwriting procedures and that is simply not mandated by the CARES Act. The banks are held harmless and therefore should be more expeditious in their application review … if the numbers provided make sense, fund it and move on. Within days (theoretically) they should receive reimbursement of the loan from the SBA plus their fees … bada bing, bada boom.

  2. Pingback: SBA data breach released tons of new applicants' data

  3. Jack google seo

    May 3, 2020 at 8:37 am

    well?this is a good article.We pray for an early end to the difficulties and a return to good life.

  4. Pingback: Challenges facing receiving the PPP loan - The American Genius

  5. Pingback: Companies seek brownie points by returning PPP cash they shouldn't have applied for

  6. Pingback: Unless you call your representative, the IRS will be forced to screw PPP recipients

  7. Pingback: The forgivable PPP loan may now not be as forgivable as before

  8. Pingback: Small business owners furious over more PPP fraud this week

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