Paycheck Protection Program

Paycheck Protection Program – PPP What Went Wrong?

  • April 29, 2020
  • 3 min read
  • 43 reads

The Paycheck Protection Program is designed by the government to aid relief for businesses that are financially suffering from the pandemic.

The program offers loans intended as an incentive to keep small businesses running and able to cover the payroll for their workers. The aim is to keep employees on the payroll while the economy gets back on its feet.

PPP is for small businesses that otherwise are unable to secure business loans and alternative capital.

The massive drawcard for business to apply for the government’s paycheck protection program is that SBA will forgive the loans if the company guarantees to use 75% of the funds received on the payroll.

The company must keep staff on the payroll for eight weeks. The other 25% of the funds are for paying interest on mortgage payments and utilities.

If funds are used for unapproved items, then the loan has a 2-year maturity and an interest of 1%.

Approved applications of PPP will be paid into business accounts within ten days of approval.

The whole spirit of the PPP is for those companies that would have no other choice but to lay off their employees to get through the pandemic. No matter the size of your company. You should be eligible.

The government initially allotted $350 billion to its small business government relief program called the Paycheck Protection Program. There has been outrage as the funds dried up faster than expected, not within days but minutes.

We now know why. Many believe that not everyone who applied for the money is genuinely ‘in need’ of it.

The big boys are not playing fair.

What Went Wrong With The PPP?

Public companies have applied so far for well over $850 million of loans. The government program is designed for small businesses without access to other sources of capital.

Big public companies have secured loans prohibiting the funds to be distributed to the hundreds of thousands of small private companies that have applied. Those small companies now wait in limbo, hoping their small loans will still be approved.

Public companies have been sneaky about finding the loophole by applying for multiple smaller loans for each company. Ashford Hospitality Trust applied for 117 separate smaller loans to the combined value of $76 million.

The reason for the outrage is that large public companies can access capital markets for funding that smaller private companies cannot do.

Whose Fixing The Problem?

Small Business Administration has spoken up refusing to let public companies get away with it. They have requested that those who have already received the fund money have two weeks to return it to the Paycheck Protection Program.

FactSquared data has proven useful in showing just how successful public companies have been in obtaining loans through the government’s PPP.

Their artificial intelligence program called Margaret was able to be modified to find PPP information in filing reports. This data allows FactSquared to offer a database of integrity in keeping public companies accountable for PPP filings and returns.

Margaret was initially created in 2017 as a database to keep track of all president Donald Trumps Public statements. A.I. such as Margaret enforces responsibility for actions that may have been hidden from the public otherwise.

The FactSquared website has encouraged accountability and disclosure for public companies who have filed loan applications for the PPP.

The site displays loan applications along with the total loan amounts per company, and whether or not the company has returned the loans that they were initially granted. To date, 11 companies have returned their PPP loans to a value of $75 million.

Many large public companies currently have no intention of repaying the PPP funds.

Lawmakers have approved $484 billion in funding for small businesses in total, including the $310 billion in PPP.

While Vice President Mike Pence said on the news last week that, “the PPP has been an incredible success to keep small businesses afloat” not everyone agrees.

In an interview with MNSBC, NBC’s senior correspondent Stephanie Ruhle said, “there are over a trillion dollars in demand for small business… the extra $250 billion will be gone within a blink of an eye.” She also believes, “The bigger issue is who technically qualifies for it.”

The main concern is not that the money has been used but what it has been used for. The whole purpose of this relief fund was to keep the economy running, and Americans employed.

What appears to be surfacing is that opportunists have used this so-called “free” money to line their pockets, which is prohibiting the funds to be distributed to those in greatest need.

With the potential $250 billion coming into the PPP fund, it will be telling who gets the benefit.

The FactSquared website is a valuable asset to enable the public to keep companies accountable.

We hope that the money actually gets distributed to those that need it most and that employees can continue to get paid.

Did you or your company apply for the paycheck protection program? Were you approved? Comment below:

Author Kimberley Smyth

Kimberley is the US Country Manager for Financer.com. She has gained years of experience in small business management and has two successful start-ups under her belt. She now focuses her energy on helping others achieve financial freedom through smart money management and investment opportunities.

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Last Updated: June 1, 2020

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