While the new stimulus package provides much-needed additional funding for the Paycheck Protection Program, it made no significant changes to the process of qualifying for a loan.
Small business advocates believe this process was flawed from the beginning, allowing well-funded corporations to grab up to 70 percent of the loans, causing the available funds to disappear before the mom-and-pops could get their applications processed.
In fact, some of the largest banks had a two-tier system, which provided “concierge services” to shepherd larger, wealthier clients through the process while forcing smaller retail businesses to wait in line, according to The New York Times.
“Shake Shack got $10 million, and Ruth’s Chris Steak House got $20 million,” observed Neil Fishman, president of the National Conference of CPA Practitioners.
“Shake Shack has announced that they are voluntarily returning the funds they received from PPP, but you would think that these larger companies would have a much easier time getting financial aid form a bank than a small local store,” he noted. “When this legislation went through Congress, did they question who would qualify? If these large corporations follow the rules, the loans will never have to be repaid.”
Fishman contrasted the cash-happy large businesses with a local ophthalmologist. “He kept his staff by cutting everyone’s hours in half for a month,” he said. “Then he had to let people go because he wasn’t getting any business. A lot of medical professionals had to close.”
In a letter to Treasury Secretary Steven Mnuchin and SBA administrator Jovita Carranza, NCCPAP pointed out the inequities in the Paycheck Protection Program.
“This program was designed to assist small businesses in retaining their emp[loyees during the crisis by providing business owners with funds to be able to retain and pay their employees while their businesses were affected by the current situation,” the letter stated. “A number of larger business entities have received a majority of the funds from the initial funding. These corporations were not intended to be allowed to participate in this program as they have other means of getting capital. This program was designed and intended to be meant for small, closely held businesses, such as a medical office, a clothing store, a local restaurant, hair/nail salon and the local hardware store. To give the larger businesses this money, when they have other means available to them that a small closely held business does not, takes this opportunity away from the small local businesses, and they may never recover. There are reports that many of these small businesses have already been forced tos shut their doors and cease operations entirely, and in many cases, permanently.”
To remedy this situation, NCCPAP suggests four actions to Mnuchin and Carranza:
1. Review the policies for which the PPP was intended to operate.
2. Request the funds given to these larger business entities be by them so that these funds may be disbursed to those small businesses that truly need the assistance.
3. Modify the application so that an applicant shows more than just the average monthly payroll. The NCCPAP feels that a business should also be required to report their gross receipts in order to participate in the PPP.
4. Place a limitation of amounts contributed to a pension plan to be included in the calculation of average monthly payroll. There is currently a limitation of $100,000 for an individual salary, but no limitation on retirement plan contributions.
“If the executive branch of the federal government wants to demonstrate its concerns for small businesses and their employees, we strongly feel that they should take immediate action on these suggestions,” the NCCPAP letter concluded.
