Can the government save small businesses?

Many are fighting for a fair share of the coronavirus rescue package

Empty businesses.
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The $2 trillion economic stimulus package passed last month has left a lot of small businesses still scrambling for support, said Jonathan O'Connell at The Washington Post. While Congress this week haggled over the details of an additional $310 billion in rescue funding, thousands of small-business owners lamented the constraints of the original $349 billion Paycheck Protection Program, which dried up in a matter of days. Only 1.6 million applications out of an estimated 30 million small businesses nationwide were approved for PPP loans, which are forgiven as long as 75 percent of the loan is used to keep workers on payroll. The limited pool of available funds, however, didn't stop Shake Shack or Potbelly from taking advantage of a loophole letting big chains qualify for up to $10 million each. Thanks to its complex corporate structure, the steak-house chain Ruth's Chris was even able to double dip for two $10 million loans.

You can lay some of the blame at the feet of big banks that may have given preference to larger clients, said Dalvin Brown at USA Today. JPMorgan already faces a lawsuit that charges it "prioritized applications for the largest loans." The bank has processed some $14 billion in loans — but still has a $26 billion backlog. The regional distribution of funds has some lawmakers questioning if the program was "political," said Zachary Mider and Cedric Sam at Bloomberg. Businesses in Mid­wes­tern states fared much better than those in coastal ones; firms in Nebraska, for instance, were granted "enough to cover 81 percent of the state's eligible payrolls," while in New York and Cal­i­for­nia the number was closer to 40 percent. The imbalance could have come about "because businesses in some states had better pre-existing relationships with community banks." But there's no way to be sure, and such questions are inevitable for a program with little oversight and no public accounting of who's getting the money.

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This mess was entirely predictable, said Timothy O'Brien at Bloomberg. The White House and Congress backed up the Brinks truck "without properly planning or managing how they would dole out" the cash. "Business owners weren't sure how best to apply for funds, the online application process was chaotic," and the first-come, first-serve approach enabled "well-heeled businesses" to skip to "the front of the line." Faced with a storm of criticism, Shake Shack at least showed a sense of shame and gave back the money. But why were midsize businesses like Shake Shack pitted against smaller ones in the first place? New funding is on the way, but it's not clear if the "business gurus" in the White House have "learned from this current fiasco." One more snag is that many businesses are forced to apply now for money they won't need until they can reopen, said Allison Prang at The Wall Street Journal. Companies must keep employees on payroll for two months "starting from when the money is received." Some business owners opted not to apply because "there likely won't be enough business" by June to justify keeping workers waiting around — and they'll just have to lay them off again when the money runs out.

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