The Senate overwhelmingly approved a fourth tranche of emergency aid to support the economy amid a coronavirus pandemic that has raised unemployment and forced non-essential businesses across the country to close their doors .
But many small business owners are “pissed off” at how large corporations and chains have used an initiative called the Paycheck Protection Program designed to lend money to businesses trying to keep their employees on the payroll – and how the big banks that distribute the loans would have prioritized the big companies – according to Amanda Ballantyne, executive director of the Small Business Coalition of the Main Street Alliance.
“The serious design flaws of PPP will not be resolved by putting more money into these programs,” Ballantyne said in a statement Tuesday.
Skepticism about the structure of the paycheck protection program adds to the growing chorus of frustration that business owners, consumers and state officials have expressed in recent weeks as Congress and the administration President Donald Trump scramble to respond to the country’s most significant economic upheaval since the Great Depression.
Stimulus checks designed to keep Americans afloat have been delayed and unevenly distributed. State unemployment offices, inundated with unemployment claims, have been slow to distribute unemployment insurance. Banks and lenders were initially unaware of the details associated with the paycheck protection program, warning small business clients that they may not be able to help them. Programs designed to restore order to the economy and the comfort of affected Americans have in many cases done the opposite, confusing business and eroding confidence in government support programs and elected officials.
The latest round of stimulus packages awaiting House approval will inject an additional $ 320 billion into the paycheck program which ran out less than two weeks after it opened as part of a back-up plan to $ 2.2 trillion. In this latest round of funding, $ 60 billion will be set aside for small businesses without existing relationships with banks.
But as currently structured, the new legislation falls far short of what small business organizations across the country hoped to see. Many small business owners have complained that banks have prioritized large business loans, potentially allowing banks to charge higher processing fees.
It is also alleged that some banks did not process loan applications on a first come, first served basis. Multiple lawsuits have been filed by small business owners in recent days against institutions such as JPMorgan Chase, Wells Fargo and Bank of America.
“While there is a need to provide more funding for these assistance programs, we have already seen that they do not provide the quick relief that would help small businesses now and in the future,” said John Arensmeyer, founder and CEO of Small Business Majority, in a statement. a statement Tuesday, saying the program “does not respond to a critical exclusion that has allowed publicly traded companies, large restaurant groups and hedge funds to demand and deplete the PPP fund.”
“When the PPP runs out again in a few days, we hope that Congress will finally be ready to speak up and take a program of direct grants for small businesses seriously,” he said.
Big chain establishments such as Shake Shack, Potbelly and Ruth’s Hospitality Group have come under fire in recent days for collectively receiving approval for tens of millions of dollars in loans from the Paycheck Protection Program which some advocates say small businesses, were intended for smaller independent establishments rather than national establishments. Chains. Shake Shack has since announced plans to return the $ 10 million it received under the paycheck program.
“We’ve seen too many examples of big corporations claiming millions when most of our moms and pop business owners are being left behind,” Frank Knapp Jr., Co-Chair of the Businesses for Responsible Tax Reform Coalition and CEO of The South Carolina Chamber of Commerce for Small Businesses said in a statement Tuesday. “It falls to the administration, which has not written rules around the program to ensure that real small businesses have a chance to get the loans they need to survive this crisis.”
Depending on the terms of the program, businesses that receive the loans – which are backed by the Small Business Administration – may have some or all of their obligations waived if they invest the money to keep their employees on staff. But some groups have also argued that these terms are too narrowly tailored, saying companies could be better served by using the funds to pay rent or restructure business models.
“By providing relatively small amounts of borrowing and strictly tying the relief to payroll spending, the PPP as currently structured is of limited utility for companies struggling to cope with a wide range of of fixed costs over an extended period, ”a group of industry groups including the United States Travel Association, the National Restaurant Association and the National Small Business Association, among others, said Tuesday in a letter written to congressional leaders.
Industry groups have warned that “companies most in need of emergency assistance will face the greatest obstacles to bringing PPP to its intended use, unless structural improvements are made quickly.” , calling for increased borrowing limits and expanded expense coverage to include rent, utilities and inventory.
Even the United States Chamber of Commerce – a group that represents businesses large and small and that has previously been successful in lobbying the Trump administration for pro-business initiatives – has questioned the effectiveness of the program. paycheck protection as currently structured.
In a statement on Tuesday, Neil Bradley, Executive Vice President and House Policy Officer, applauded the Senate’s passage of the new stimulus bill, but warned lawmakers “should then make the technical corrections necessary for the programs created in the CARES Act to ensure that all employers – especially all small employers – have access to essential support during this time. ”
The approximately $ 350 billion initially allocated to the paycheck protection program have been exhausted for almost a week. Democratic lawmakers had advocated earmarking more funds in this latest stimulus bill for minority and women-owned businesses. But Republicans argued that the economy would be better served by quickly replenishing program funds without introducing additional complexity.
The Business for Responsible Tax Reform association released the results of a survey of more than 500 small businesses on Tuesday. This report found that 44% of those surveyed had to close their businesses due to the coronavirus outbreak. More than two-thirds, 68%, had applied for a Paycheck Protection Program loan, but only 28% were approved. And only 15% said they actually received their loan.
Virtually every industry has been affected by the coronavirus outbreak, making the current situation very different from a typical recession in which the government can more specifically tailor its support. During the Great Recession, for example, banks and automakers received targeted aid.
But the government does not have the luxury of targeting support when the vast majority of the economy is essentially frozen. After giving bailouts to airlines and emergency funds to Boeing – and after Trump suggested Tuesday that he would direct some kind of stimulus to domestic oil producers – small business owners criticized the administration for apparently prioritizing certain industries over others when virtually all are suffering.
“In March, the food and beverage industry accounted for about 60% of total jobless claims. To date, less than 9% of approved loans have gone to the hospitality industry, and even less to independent restaurants. “said the Independent Restaurant Coalition. in a statement Tuesday. “The latest stimulus bill provided for a special $ 25 billion waiver to keep 750,000 airline employees at work. Why not make some changes to help independent restaurants, which employ 15 times more people?