A month ago, Congress authorized $349 billion of Paycheck Protection Program (PPP) loans in the CARES Act to help small businesses pay for payroll, rent, and utilities during the COVID-19 shutdowns.
According to a survey conducted by the National Federation of Independent Business, about 80 percent of small businesses applied for small business loans, but only 20 percent of those applications have been processed. And the money’s already run out.
This week, Congress is back in session again to replenish the fund.
Large companies access small business funds
The inability of many small businesses to access the money could stem from the fact that a sizable number of large companies were able to access and use the loans.
The money, distributed through the Small Business Administration and administered through SBA-approved lenders (which includes most major banks), was supposed to be given out to companies with fewer than 500 employees. Capped at $10 million dollars, the loans had special conditions: Lenders would forgive the loan if it was spent on payroll, rent, utilities, and mortgage interest.
But some of the nation’s largest banks, including JPMorgan Chase and Citibank, prioritized the applications of their wealthiest clients. In fact, several publicly traded companies received the loans. Potbelly, a sandwich company with around 6,000 employees, received a loan. So did Hallador Energy, a coal company with around 900 employees.
That was wrong, according to Rep. Angie Craig of Minnesota’s Second District. “Certainly it was not congressional intent, that large franchise organizations would be able to come in,” she said.
On Tuesday, Treasury Secretary Steven Mnuchin said large companies would be blocked from using the program. “There are severe consequences for people who don’t attest properly to this certification,” he said. It is unclear what those consequences would be, if any.
Some companies have returned the money. Shake Shack, a multimillion-dollar fast-food company, was able to receive a $10 million dollar loan. On Monday, the company announced it would give back the loan.
Craig thinks more companies should follow suit. “Those that took advantage, in my opinion, need to pay the money back,” she said.
Despite the problems with the program, for the moment Congress is focused only on getting more funds into the account. Even agreeing to that has been a challenge: Democratic and Republican leaders have been in a bitter back-and-forth about how to respond. Democrats refused to pass additional small business funding until Republicans agreed to more money for states and municipalities to address the virus.
Leadership in the House and Senate agreed to a compromise this week, resulting in a $500 billion bill that passed the Senate on Tuesday. The bill includes $320 billion to replenish the PPP fund, as well as $60 billion for a separate small-business emergency program, $75 billion for hospitals, and $25 billion for testing.
The House is set to vote on that bill today.
“It’s a rescue bill,” Craig said. “And unfortunately I believe we’re still going to be considering the rescue phase here for some time.”