How Big Business Seized Wage Protection so Quickly
Do you feel like you should be mad at Shake Shack or Potbelly Sandwich Shop right now, but can’t explain exactly what they did wrong ?
This is likely because the Payroll Protection Program, a loan program offered through the Small Business Administration, is so damn confusing. The program, launched under the $ 2.2 trillion Coronavirus Act, provides small businesses with up to $ 10 million in loans so that they can continue to pay basic expenses such as wages, rent and utilities. If the recipient businesses don’t lay off employees for eight weeks, the loan can be forgiven. If they cannot maintain their payrolls, they must pay them back at an interest rate of 1% .
When the SBA opened applications, it was a terrible show: small businesses – the ones most in need of economic recovery – faced technical difficulties and received conflicting reports on how to apply, while banks often reported that they were still did not receive instructions on how to apply. continue.
How small business ended up outside PPP
The money in the program ran out after 13 days. But before that happened, several large companies bought out their shares.
Typically, a business is considered “small” if it has fewer than 500 employees. But PPPs may apply accommodation or catering services with more than one physical location and fewer than 500 employees in each location .
The list of companies eligible for PPP has not been released by the government, but the Associated Press checked the regulations and found that at least 94 companies that received assistance since April 3 are public. These 94 companies received a total of $ 365 million in PPP loans out of a total of $ 349 billion.
They took the money in part because they had the resources to get it – relationships with large financial institutions, large legal teams, etc. And they knew how they could play the system: a corporation with subsidiaries (smaller subordinates companies) could apply for a maximum amount for all of its subsidiaries if they all have different tax identifiers.
Do you see where this is going?
Where did the PPP money go?
Here are just a few of the companies (both public and private) that have received salaries through PPPs.
Shake Shack: Borrowed $ 10 million under the Payroll Protection Program (PPP), which was later promised to be paid back. The network has about 275 offices around the world.
Potbelly: to get a loan in the amount of 10 million dollars to 470 offices, then I said that, too, will return it .
Ruth’s Chris Steak House: Received $ 20 million in PPP funds but later said he would return it . The network is represented by more than 150 points around the world.
AutoNation: More than $ 77 million raised. He has used separate tax numbers for some of his more than 300 affiliates to apply for funds. The Board voted to return all PPP funds and cancel all pending applications.
Sweetgreen: Received a $ 10 million PPP loan but decided to repay it the same day . The network includes more than 90 establishments.
Taco Cabana and Pollo Tropical: Raised $ 15 million through their parent company, Fiesta Restaurant Group. The company, which is now “revaluing” funds, has 306 offices in Texas and Florida.
Fogo de Chao: Received $ 20 million in two loans . The restaurant chain has 42 locations in the United States.
Kura Sushi: Received $ 10 million from PPP but said he would return it . The network from California has 25 locations.
J. Alexander’s: Received $ 15.1 million in two loans . Later they said that they would return the money. There are about 50 restaurants in the chain.
Ashford Hospitality Trust: Raised $ 29 million to support 42 hotels nationwide, including the Ritz Carlton in Atlanta.
Los Angeles Lakers: Received $ 4.6 million in PPP funds, but told ESPN they got it back .
Why refunds don’t work (yet)
The money seems to be arriving. May be. Congress recently passed another aid bill , which pledged an additional $ 310 billion into PPPs.
While this aid package was in the works, the SBA asked the companies to consider refunds, clarifying its original requirement that the companies applying are simply checking that “the current economic uncertainty makes this loan request necessary.” Now, the Washington Post notes, companies with other sources of funds are likely not to be considered for PPP funds.
But at the same time, the funds returned from embarrassed corporations could not be immediately redistributed among other businesses – the SBA had to first wait for the second bailout bill to pass.
The SBA also noted that companies that have already received a PPP loan must repay it in full by May 7 to avoid scrutiny. Treasury Secretary Stephen Mnuchin said the government will audit any company that receives more than $ 2 million from the program today .
When the SBA apps site reopened on Monday, it was unable to function properly due to demand. The funding was expected to end within 48 hours.
Is it worth holding a grudge?
Many large businesses that received PPP loans repeated similar messages in their criminal press releases, tweets and blogs: they did not realize that funds would be exhausted so quickly and felt bad that many small businesses were left on the sidelines. …
In the meantime, others are stepping up their commitments to use the loans already received, claiming that they too have suffered. After all, only a fraction of the millions of new jobless claims were filed by people who work for family organizations.
But the reason corporate subsidiaries and individual business centers can apply for funding at all is because the restaurant and hospitality industry lobbied Congress as hell in the weeks leading up to the passage of the CARES Act, the first coronavirus relief package.
So you might be mad at Shake Shack, Potbelly, or whatever. But the problem with PPP goes far beyond the individual appeal of a company for help.