Small Business Stimulus Program Causes Outrage
As many of you have seen, the government authorized another “capital injection” recently, meant to give support to struggling small businesses and their employees to the tune of $350 Billion.
Similar to the $2 Trillion CARES Act, the US Treasury Department is trying to pull as many strings as they can to put money into the hands of those financially affected by the pandemic. But as it generally happens, there are positives and negative consequences to everything the government does.
For more background, the Paycheck Protection Program (PPP) is available to all businesses with fewer than 500 employees that will maintain their payroll during the shutdown and not lay off employees, hence paycheck protection. The objective is for small businesses to funnel money into the hands of their employees. By doing so, these people can use this money to meet their bare necessities and pay rent/mortgages to keep the economy going.
If business owners prove to use these funds for approved expenses, then they don’t have to pay the loans back. This would allow many essential businesses to continue to operate. That’s the good news. The bad news is that this process is not as easy as it seems and there seems to be some favoritism happening behind the scenes.
In a matter of 2 weeks, the first wave of PPP funds has already been wholly allocated and many small business owners are left holding their hands out on the sidelines with nothing to show for. Not only did the Small Business Administration’s website crash, but there was also a fear that a data breach occurred and millions of people’s personal and business information were leaked across the internet.
Additionally, it seems that certain loopholes in the program have made these funds allowable for large corporations like Shake Shack to receive $10,000,000 in funding while the mom and pop restaurant next door is having trouble filling out the application and getting through the portal. Large public companies like Shake Shack likely have teams of bankers to facilitate these forms for them and also have unique access to capital due to their volume of cash flows on a normal day that small businesses don’t. Now, Shake Shack claimed that they would actually give the funds back, but this further highlights the backward way our government operates and the skewed fiscal attention they provide for the big guys.
To further hit that point home, the lenders that have processed these funds have made almost $6 Billion in fees from acting as pass-through vehicles. With 74% of the requested loans being less than $150,000, nearly 40,000 small businesses missed out on their funding, because the lenders did what they do every other day and just piped money from the government to larger accounts.
This broken effort has left many small businesses enraged as they struggle to work with their banks to fill out these forms most effectively, yet companies with large employee bases and infrastructure are being pushed to the front of the line by their friendly bankers who in turn are also making a couple of percentage points in fees off of them. The Old Boys Club of Corporate America seems to persist even in the darkest of times.
The government is looking to roll out the second wave of PPP funding very soon so stay tuned for further updates. Hopefully, they will get it right this time around.
Exclusive promotions, rewards and insights on the journey to financial freedom. Earn & save more today.