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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.

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:

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.

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.

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.

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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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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Business News

You should apply to be on a board – why and how

(BUSINESS NEWS) What do you need to think about and explore if you want to apply for a Board of Directors? Here’s a quick rundown of what, why, and when.

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board of directors

What?
What does a Board of Directors do? Investopedia explains “A board of directors (B of D) is an elected group of individuals that represent shareholders. The board is a governing body that typically meets at regular intervals to set policies for corporate management and oversight. Every public company must have a board of directors. Some private and nonprofit organizations also have a board of directors.”

Why?
It is time to have a diverse representation of thoughts, values and insights from intelligently minded people that can give you the intel you need to move forward – as they don’t have quite the same vested interests as you.

We have become the nation that works like a machine. Day in and day out we are consumed by our work (and have easy access to it with our smartphones). We do volunteer and participate in extra-curricular activities, but it’s possible that many of us have never understood or considered joining a Board of Directors. There’s a new wave of Gen Xers and Millennials that have plenty of years of life and work experience + insights that this might be the time to resurrect (or invigorate) interest.

Harvard Business Review shared a great article about identifying the FIVE key areas you would want to consider growing your knowledge if you want to join a board:

1. Financial – You need to be able to speak in numbers.
2. Strategic – You want to be able to speak to how to be strategic even if you know the numbers.
3. Relational – This is where communication is key – understanding what you want to share with others and what they are sharing with you. This is very different than being on the Operational side of things.
4. Role – You must be able to be clear and add value in your time allotted – and know where you especially add value from your skills, experiences and strengths.
5. Cultural – You must contribute the feeling that Executives can come forward to seek advice even if things aren’t going well and create that culture of collaboration.

As Charlotte Valeur, a Danish-born former investment banker who has chaired three international companies and now leads the UK’s Institute of Directors, says, “We need to help new participants from under-represented groups to develop the confidence of working on boards and to come to know that” – while boardroom capital does take effort to build – “this is not rocket science.

When?
NOW! The time is now for all of us to get involved in helping to create a brighter future for organizations and businesses that we care about (including if they are our own business – you may want to create a Board of Directors).

The Harvard Business Review gave great explanations of the need to diversify those that have been on the Boards to continue to strive to better represent our population as a whole. Are you ready to take on this challenge? We need you.

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Business News

Everyone should have an interview escape plan

(BUSINESS NEWS) A job interview should be a place to ask about qualifications but sometimes things can go south – here’s how to escape when they do.

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interview from hell

“So, why did you move from Utah to Austin?” the interviewer asked over the phone.

The question felt a little out of place in the job interview, but I gave my standard answer about wanting a fresh scene. I’d just graduated college and was looking to break into the Austin market. But the interviewer wasn’t done.

“But why Austin?” he insisted, “There can’t be that many Mormons here.”

My stomach curled. This was a job interview – I’d expected to discuss my qualifications for the position and express my interest in the company. Instead, I began to answer more and more invasive questions about my personal life and religion. The whole ordeal left me very uncomfortable, but because I was young and desperate, I put up with it. In fact, I even went back for a second interview!

At the time, I thought I had to put up with that sort of treatment. Only recently have I realized that the interview was extremely unprofessional and it wasn’t something I should have felt obligated to endure.

And I’m not the only one with a bad interview story. Slate ran an article sharing others’ terrible experiences, which ranged from having their purse inspected to being trapped in a 45 minute presentation! No doubt, this is just the tip of the iceberg when it comes to mistreatment by potential employers.

So, why do we put up with it?

Well, sometimes people just don’t know better. Maybe, like I was, they’re young or inexperienced. In these cases, these sorts of situations seem like they could just be the norm. There’s also the obvious power dynamic: you might need a job, but the potential employers probably don’t need you.

While there might be times you have to grit your teeth and bear it, it’s also worth remembering that a bad interview scenario often means bad working conditions later on down the line. After all, if your employers don’t respect you during the interview stage, it’s likely the disrespect will continue when you’re hired.

Once you’ve identified an interview is bad news, though, how do you walk out? Politely. As tempting as it is to make a scene, you probably don’t want to go burning bridges. Instead, excuse yourself by thanking your interviewers, wishing them well and asserting that you have realized the business wouldn’t be a good fit.

Your time, as well as your comfort, are important! If your gut is telling you something is wrong, it probably is. It isn’t easy, but if a job interview is crossing the line, you’re well within your rights to leave. Better to cut your losses early.

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Business News

Australia vs Facebook: A conflict of news distribution

(BUSINESS NEWS) Following a contentious battle for news aggregation, Australia works to find agreement with Facebook.

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News open on laptop, which Australia argues Facebook is taking away from.

Australia has been locked in a legal war against technology giants Google and Facebook with regard to how news content can be consumed by either entity’s platforms.

At its core, the law states that news content being posted on social media is – in effect – stealing away the ability for news outlets to monetize their delivery and aggregate systems. A news organization may see their content shared on Facebook, which means users no longer have to visit their site to access that information. This harms the ability for news production companies – especially smaller ones – from being able to maintain revenue and profit, while also giving power to corporations such as Facebook by allowing them to capitalize on their substantial infrastructure.

This is a complex subject that can be viewed from a number of angles, but it essentially asks the question of who should be in control of information on a potentially global scale, and how the ability to share such data should be handled when it passes through a variety of mediums and avenues. Put shortly: Australia thinks royalties should be paid to those who supply the news.

Australia has maintained that under the proposed laws, corporations must reach content distribution deals in order to allow news to be spread through – as one example – posts on Facebook. In retaliation, Facebook completely removed the ability for users to post news articles and stories. This in turn led to a proliferation of false and misleading information to fill the void, magnifying the considerable confusion that Australian citizens were confronted with once the change had been made.

“In just a few days, we saw the damage that taking news out can cause,” said Sree Sreenivasan, a professor at the Stony Brook School of Communication and Journalism. “Misinformation and disinformation, already a problem on the platform, rushed to fill the vacuum.”

Facebook’s stance is that it provides value to the publishers because shared news content will drive users to their sites, thereby allowing them to provide advertising and thus leading to revenue.

Australia has been working on this bill since last year, and has said that it is meant to equalize the potential imbalance of content and who can display and benefit from it. This is meant to try and create conditions between publishers and the large technology platforms so that there is a clearer understanding of how payment should be done in exchange for news and information.

Google was initially defiant (threatening to go as far as to shut off their service entirely), but began to make deals recently in order to restore its own access. Facebook has been the strongest holdout, and has shown that it can leverage its considerable audience and reach to force a more amenable deal. Australia has since provided some amendments to give Facebook time to seek similar deals obtained by Google.

One large portion of the law is that Australia is reserving the right to allow final arbitration, which it says would allow a mediator to set prices if no deal could be reached. This might be considered the strongest piece of the law, as it means that Facebook cannot freely exercise its considerable weight with impunity. Facebook’s position is that this allows government interference between private companies.

In the last week – with the new agreements on the table – it’s difficult to say who blinked first. There is also the question of how this might have a ripple effect through the tech industry and between governments who might try to follow suit.

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