Small business loan program reopens after its initial problems are revealed

by | Apr 28, 2020

Small businesses across the state have had to adapt to the changes that COVID-19 has caused. Businesses have been forced to shut their doors or work from home given Governor Ron DeSantis’ stay at home order that began earlier this month. President Donald Trump issued a small business loan program with the goal of helping businesses across the country with about 500 or fewer employees while the economy sinks and could undergo a possible recession.

The program was intended to help businesses who don’t have means of financing themselves through raising money in markets or bank borrowing. It was not intended for businesses who could survive an economic hit from COVID-19.

The program loan had a 1% interest rate didn’t require all businesses to pay it back as long as it was spent on necessities like rent or payroll.

The problems with the program began days after it initially rolled out. Within the first couple days the money made available had run out after giving it away to first come first serve businesses who applied. This made congress approve an additional $310 billion in funding just for the businesses who filled out applications, it is unlikely that for those who haven’t will receive any funding even with the approved $310 billion.

According to a New York Times investigation, dozens of large but lower-profile companies with financial or legal problems had received large payouts under the program, according to an analysis of the more than 200 publicly traded companies that have disclosed receiving a total of more than $750 million in bailout loans. 

Some companies are announcing that they will pay back the money they received. Over the weekend, the operator of Potbelly Sandwich Shops said that it would return a $10 million loan it got from a federal small business stimulus program.

Potbelly Corporation joined the owners of Shake Shack, the chain Kura Sushi and Ruth’s Chris Steak House in returning its loan. Federal officials clarified last week that the loans should not go to large public companies with other sources of capital.

There are more than just these businesses who took advantage of the program, there had to have been at least a dozen more who accepted the loan when they had the ability to pay their business’s rent and payroll where there are small businesses across the state of Florida who do not have the same ability.

The government is not disclosing who has accepted the loans, leaving it up to the businesses themselves to decide whether they want to disclose the information.

According to The Washington Post, part of the Cares Act’s Paycheck Protection Program — will be cornered by industry insiders and large businesses that already have access to cash. At least 140 publicly held companies received funds from the first Paycheck Protection Program, including large restaurant chains, a Fortune 500 auto retailer and a pharmaceutical company with $14 million in cash.
“In the time since the previous round of funding ran out, businesses and banks have used this time to prep and perfect applications,” said Juleanna Glover, a D.C.-based corporate public affairs adviser tracking the program.“Once the application portal reopens, there will be an immediate flood of tens of thousands of applicants. Maybe millions. I’d be surprised if this next tranche lasts even 72 hours,” Glover said.

 

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