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PPP loan problems

Why Small Businesses Feel They Were Misled by the Paycheck Protection Program

The government’s response to COVID-19 initially purported to provide billions of dollars of relief to small businesses.

However, this relief was not made available at the same time to businesses.  In fact, the relief was first made available to large and sophisticated companies, which asserted claims to the funds, through their sophisticated financial advisors, that had access to the information, before the loan applications were first made available to the general public and small businesses. 

Small businesses were misled by the labeling of these programs and promises, and clearly they suffered harmful delays, while many of the larger businesses were in the lucky category of those being able to work during shut-down and technically were not small businesses.  As a result, there was nothing left for small businesses who only discovered this through surprise, and who continue to wait for the program to deliver something.

Contrary to popular belief, a “small business” is defined as encompassing relatively large businesses too.  Under an SEC definition, for example, a company can qualify as a “small business” as long as it generates less than $35M in annual gross receipts.  

Thus, the relief applications were provided first to very large businesses that had access to information and sophisticated advisors and resources and are now still being promised to be rolled out to small businesses for the first time.  What is notable is that at the time the many large businesses grabbed the funds, they had likely suffered no losses, and or were in a position to mitigate their losses, at the time the applications were first exclusively made available to them but not small business owners.  The middle class was particularly squeezed since not all small business owners are being promised an individual relief check.

While continuing to wait on correction of the failure of the first PPP program, and remaining shut-down, small businesses in America have continued to rack up debt due to closure of their business and obligations coming due. Eventually, the truth came out that several large companies and private institutions had already received tens of millions of dollars of government bailouts, profiting greatly therefrom, while small business owners either had not received any response to the submission of their materials or have not been provided access to the PPP yet.

Last Friday President Trump signed a $484 small business coronaries relief bill into law.  It remains to be seen whether and how this relief package will fare.

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