The COVID-19 economic crisis has been catastrophic for mom-and-pop shops and small businesses across the U.S. such as barbers, personal trainers and cleaners. Most are without a safety net to survive a pandemic.
The Small Business Administration said on Thursday it has run out of money for businesses seeking loans from the Paycheck Protection Program (PPP), created to cover expenses during the crisis.
“The SBA is currently unable to accept new applications for the Paycheck Protection Program based on available appropriations funding,” the agency said. “Similarly, we are unable to enroll new PPP lenders at this time.”
The federal aid package’s $349 billion Paycheck Protection Program is administered by banks and the Small Business Administration. It offers bank loans that are forgiven and reimbursed if participating businesses keeps workers on the payroll. The loan forgiveness includes the owners’ fixed costs such as rent, insurance and utilities, giving them a chance to weather the economic crisis and not close their doors forever, according to Governing.com.
On Capitol Hill, lawmakers are now arguing over replenishing the PPP program.
The barbers and mom-and-pop shops had to compete for the PPP loans with big businesses and multimillion-dollar hedge funds that are also lining up for government support — or as Bloomberg put it, “Free money.”
Ruth’s Chris Steak House, which has 150 locations and employs 5,000 people, was also one of the first publicly traded companies to get a federal SBA loan under the PPP, which means it has money to keep paying employees, Fox News reported.
A loan will be forgiven if 75 percent of it is used for payroll.
Banks have been criticized because many are making the loan program available only to their own customers, according to dozens of small business owners that contacted NPR. That worried some small business advocates because it threatens to leave out Black-owned businesses.
Many hedge funds qualify for Paycheck Protection Program loans because most have less than 500 staffers, FastCompany reported: “Hedge funds typically hire as few people as possible so that their top traders don’t have to split millions in management fees — which is ironically convenient when it comes to PPP eligibility.”
Hedge funds also have access to high-powered law firms, which were quick to tell clients about the program and how to tap into it, hosting webinars on the program in early April, according to Bloomberg. Some hedge fund managers have already applied for PPP loans, which are distributed first-come, first-served.
“Just because the business has a name, private equity or hedge fund manager, doesn’t necessarily mean that they’re loaded with rich people,” former White House communications director Anthony Scaramucci told MSNBC. Scaramucci owns SkyBridge, a firm that invests in hedge funds.
Listen to GHOGH with Jamarlin Martin | Episode 70: Jamarlin Martin Jamarlin goes solo to discuss the COVID-19 crisis. He talks about the failed leadership of Trump, Andrew Cuomo, CDC Director Robert Redfield, Surgeon General Jerome Adams, and New York Mayor de Blasio.
Some traders “insist they are small businesses—just like hair salons, restaurants and dry cleaners—that could use a helping hand after global markets tumbled and cost them money,” Bloomberg reported.
More than 30 million small businesses in the U.S. employ 47.3 percent of the private workforce, according to the U.S. Small Business Administration.
“Huh, imagine that. Small companies, the ones producing the most jobs in this country, are stuck while multi-national, multi-billion dollar companies ride into the sunset with their coffers full,” a reader commented on Marketwatch,
“I wonder how much of the SBA’s budget was siphoned off to Trump-Kushner enterprises?” another person commented.
