Emergency Pandemic Funds Mostly Ended Up With Large Businesses
Smaller businesses needed the emergency relief for payroll, rent or mortgage expenses. However, more than half of the loans that were given out in November went to just 5 percent of recipients. The Small Business Administration (SBA) finally revealed the names of the businesses that received a loan under PPP on Tuesday night. According to the data, around 600 predominantly larger companies received the maximum loan of $10 million that is allowed under the program. This included national restaurant chains such as T.G.I. Friday’s, Ted’s Montana Grill and P.F. Chang’s.
Treasury Department and SBA officials have hit back and argued that the program was able to benefit smaller businesses because more than 87 percent of the loans were for less than $150,000, as of August. However, the new data also showed that only 28 percent of the total funds were used for loans of less than $150,000, with more than half of the $525 billion going to bigger businesses.
According to Liz Hempowicz, director of public policy for the nonprofit Project on Government Oversight, the new data shows how the Trump administration prioritized financial aid on wealthy organizations at the expense of small firms. Nearly 100 businesses received a total of more than $34 million in loans that were listed at the address at 40 Wall Street. This building has ties with the Trump Organization.
“The data shows that this program primarily benefited the well-banked and well-lawyered at the expense of the small businesses it was supposed to benefit,” Hempowicz said.
The newly released data comes after over 10 news organizations filed a federal lawsuit under the Freedom of Information Act which challenged the SBA’s refusal to release records on loan amounts and borrowers. The agency did not appeal the decision made by a federal judge who ordered the release of the data by Tuesday.
“Many months and broken promises later, the court-ordered release of this crucial data while the Trump Administration is one foot out the door is a shameful dereliction of duty and flagrant mismanagement of a program that millions of workers and small businesses needed to get through this pandemic,” Kyle Herrig, the president of government watchdog Accountable.US, said in a statement to NBC News.
“Only now—after its hand has been forced, hundreds of thousands of small businesses have gone under and millions of taxpayer dollars were wasted—has this administration pulled back the curtains to reveal the malpractice going on behind the scenes.”
The SBA calculated loan figures based on monthly payroll numbers with a maximum loan in place being capped at $10 million. Businesses with up to 500 employees were eligible for the loan, however that limit was relaxed for hotel and restaurant companies.
Hempowicz has also said that the first round of PPP funding favored those with established banking ties, meaning smaller firms lost out on funding at a critical period.
“Businesses in that top 5 percent likely have access to other capital,” she said. “These are not the ones you would traditionally think of as a small business. It really raises questions about what the priorities of this SBA are. … Is it to help small business, or is it to return money to the top segment of the economy?”
According to Amanda Ballantyne, executive director of the advocacy group Main Street Alliance, the data demonstrates the impact of relying on banks to distribute the funds.
“This new data verifies what we have heard directly from our small-business members — that the PPP program advantaged big businesses over small and exacerbated long-standing disparities in access to credit and capital for underbanked communities,” Ballantyne said.
PPP was conceived as a method to temporarily pay small companies to keep their employees on staff for eight weeks, with it being largely credited with helping millions of businesses make payroll during the first few months of the coronavirus pandemic, positively impacting tens of millions of employees. However, the program’s effectiveness is in question due to payroll provider Gusto having found that the likelihood that workers would lose their job at a company that took a PPP loan increased by 25 percent during the week that the loan’s restrictions ended.
Around 232,000 jobs may have been eliminated as the restrictions expired. “Companies really emerged in no better shape,” said Luke Pardue, a Gusto economist. “A lot of that is due to the fact that the economy is in no better shape.”
Previous publications of PPP loan data have shown that the program was falling short of the Trump administration’s claims of its success. Several errors were found in a Post analysis of 4.9 million loans that was initially released by the SBA which casted doubt on the administration’s claim that the $517 billion in lending had “supported” 51 million jobs.
Harrison Discombe is a Contributing Editor at The National Digest based in the United Kingdom. You can reach him at inquiries@thenationaldigest.com.
