Businesses large and small are taking a hit, thanks to the coronavirus pandemic. With hundreds of millions of Americans being asked to stay at home, the country could be on the verge of another economic recession as hundreds of businesses struggle to reopen their doors.
That’s why the federal government created the Paycheck Protection Program (PPP), authorizing $349 billion in forgivable loans for businesses that have been affected by the pandemic. Businesses with less than 500 employees, sole proprietorships, and self-employed individuals can apply for loans through the Small Business Association (SBA).
If these companies use the bulk of their funds to pay their employees, the loans will be forgiven outright. This program is designed to hold business owners and their employees over until they can go back to work and earn a paycheck.
If you are looking for a loan for your small business, learn more about this program and how it can help you keep the lights on until you can go back to work.
How Does the Paycheck Protection Program Work?
Businesses can apply for a one-time forgivable loan through an approved SBA lender. Many healthcare providers who own their own businesses are looking for loans, including those who run medical spas or wellness centers, physical therapists, home health aides, care specialists, and freelance providers who may suddenly find themselves out of work.
If you need a loan for your businesses, contact your local lender and fill out an application. Visit the PPP Information Sheet from the Treasury Department to learn more about this program. If you receive a loan, you will need to show that you spent the bulk of these funds on payroll if you would like the loan to be forgiven. The government wants to make sure that business owners are keeping their workers afloat instead of lining their own pockets.
If you are self-employed and out of work, you can also apply for unemployment through your state. Freelancers are now eligible for these benefits.
Big Problems for Small Businesses
Unfortunately, the PPP isn’t holding up as well as expected. The program was meant to be a financial lifeline for businesses with fewer than 500 employees during this uncertain time. However, some of the wealthiest businesses in the country have been pulling from the PPP, as well. The first wave of funding quickly ran out within the first two weeks. As a result, many small business owners have had to put their applications on hold.
Congress recently approved another wave of $310 billion in PPP funding to keep this program going, but the SBA website crashed the first day these funds were supposed to be available.
Certain lenders are also refusing to process applications for some small businesses, even though these funds should be made available to everyone. It seems banks are prioritizing larger clients in order to make as much money as possible via processing fees. If a bank can earn hundreds of thousands of dollars in processing fees from one large client, serving business owners with just a few employees may seem like a waste of time.
The banking industry is not immune to discrimination. The financial industry has already recouped around $10 billion in processing fees thanks to the PPP. Lenders are the ones processing these transactions, so they need to collect a fee in the process.
Abusing the System?
Larger companies are at an advantage when it comes to getting approved for loans from the PPP, but some of these companies are worth millions of dollars, raising eyebrows across the country.
A recent report from CNBC shows how Trevor Milton, the billionaire founder of Nikola Motor Co., received $4 million from the PPP. The company is currently in the middle of a merger, so it can’t access funds from public and private lenders. Milton said the company needed money from the PPP to keep its 350 employees on the payroll, but many small business owners are calling foul play.
On the Facebook page “Funny Nurses,” dozens of healthcare providers were quick to call out Milton and Nikola for abusing the PPP.
Sean Anderson, a fan of the page, posted a scathing comment that said, “The government needs to change the definition of what is considered a small business. The threshold of 500 or less employees seems too high. The funds didn’t go to the vulnerable small business operators, the mom & pop’s, the Uber drivers and others. For these publicly traded companies to receive PPP funds is a travesty, but I guess that’s what happens when you cannot afford to pay for a lobbyist.”
Another follower of the page, Nancy Ailes, went on to say, “My sister owns a True small business and they applied for help but got nothing!”
In his defense, Milton argues his PPP application did not prevent other small business owners from getting their loans. He told CNBC, “We didn’t prevent those small companies from getting their money. We applied what the government said were specific requirements. And we fit every one of those.”
Nikola is one fifth the size of what the SBA considers a small business, even though the company earns just under $50 million a year.
The recent rollout of the PPP may change the way the federal government defines small businesses. The second wave of funding should help more businesses in need, but there are still problems that need to be fixed. The coronavirus pandemic and the government’s economic relief efforts are exposing certain inequalities in the American financial system. If you are having trouble securing a loan from the SBA, tell us your story.