Big Businesses That Raked in Paycheck Protection Program Funds
Big Businesses That Raked in Paycheck Protection Program Funds
In March 2020, Congress passed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act. The massive stimulus program gave checks of $1,200 to taxpayers, funded $260 billion in increased unemployment benefits, and started the Paycheck Protection Program (PPP), which set aside $350 billion in forgivable loans (later expanded to $669 billion and then $953 billion in subsequent rounds) to employers that didn’t lay off workers. The ostensible purpose of the PPP was to safeguard jobs at small to mid-sized firms that didn’t have financial cushions to ride the pandemic out, helping forestall economic collapse.
The vast majority of individual loans went to good use, protecting jobs at small to medium sized businesses across the country and providing a critical firewall for those businesses at the height of the pandemic. But rules for who qualified were vague, and Trump’s Small Business Administration (SBA) delegated the process of choosing who got the money to banks, many of which rushed to provide their wealthier clients with preferential access to the new lines of credit. That meant as the first round of funds went dry, many companies with the least need had already tapped in.
When the program rolled out in April with the initial $350 billion in funds, the SBA issued a warning that big banks and large chains that had made a run on the available funding without any particular need to do so should consider returning funds. By July 2020, a total of $30 billion in loans had been returned or canceled, including $435 million of the more than $1.3 billion nearly 450 public companies disclosed receiving. That list included the Los Angeles Lakers, a luxury cruise line, sandwich chain Potbelly’s, the holding company that owns Ruth’s Chris Steak House, an online aftermarket auto parts seller, biotech and pharmaceutical companies, real estate firms, telecommunications equipment manufacturers, and more. The combined market cap of the nearly 450 companies was estimated at nearly $35 billion.
That month, ProPublica highlighted a hospital and therapy center chain called Vibra Healthcare which used a series of limited liability companies to blow past the $10 million maximum and collect $97 million in loans. The site found a Las Vegas casino operator used similar tricks to get 20 loans, while an Illinois nursing home chain got 51 loans and another nursing home chain in Georgia got 19 loans. Their investigation turned up $516 million in funds that went to just 15 organizations.
Amanda Fischer, the Washington Center for Equitable Growth’s policy director, told ProPublica that funds should be available for every employer, big or small, “But if we’re not going to do that, I do understand concerns about businesses that don’t technically comply, and it’s not a good look.”
“It’s Congress’ fault,” Fischer told ProPublica. “We should have helped everyone, or targeted the neediest businesses instead.”
In September 2020, staffers for the Democratic majority on the Select Subcommittee on the Coronavirus Crisis found that nearly 11,000 loans worth a total of over $1 billion went to borrowers who received more than one loan (despite SBA rules stating companies could only receive one). They wrote in a report that there was a frustrating lack of oversight in the program. A December 2020 analysis in the Washington Post found most of the money in the $522 billion the PPP doled out by August went out to just a fraction of all recipients, with just 5% of borrowers getting more than half the funds. Around 600 large businesses received the maximum loan of $10 million.
According to the New York Times, just 1% of lenders got a quarter of the money, while minority-owned businesses got disproportionately little funding.
The Project on Government Oversight’s Liz Hempowicz told the Post, “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.” She added that as it was easier for companies with banking connections to receive funds early on, “Businesses in that top 5 percent likely have access to other capital. 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,” Hempowicz added. “Is it to help small business, or is it to return money to the top segment of the economy?”
