APRIL 20, 2020

News Roundup for Small Business Owners

The latest news about relief efforts for small businesses, particularly via the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).

• UPDATE: Forbes published an article late this afternoon about how banks dealt with existing relationships with larger companies first. The SBA hasn’t released names of companies that received loans, but Forbes found 71 publicly traded companies received PPP loans, including $175 million to companies that were struggling even before COVID-19 hit. It found that industries that weren’t impacted strongly by the pandemic, such as construction or software development, received aid. The sad thing is that Forbes doesn’t think anything done was illegal, just inequities that are baked into our system, and those with connections taking advantage of Congress’ desire to get money out quickly. (Forbes)
• Numerous stories came out over the weekend about large companies who were awarded PPP loans. The reason this is controversial is because the whole point of the program was to help small businesses who lack the capabilities to get funding quickly to keep their workers employed. In response to these stories, Shake Shack has announced it will return its $10 million loan. While undoubtedly a restaurant like Shake Shack has been hurt by the crisis, they have $100 million cash on hand. (CNN, Reuters)
• Senator Marco Rubio, who is the chairman of the Senate Committee on Small Business and Entrepreneurship, replied to these stories by tweet saying:

• Several class action lawsuits have been filed alleging unfair business practices against how large banks distributed PPP Loans. According to the suits, Wells Fargo, Bank of America, JPMorgan Chase, and Bancorp front-loaded their applications with higher dollar loan amounts to maximize fees. The CARES Act called for applications to be treated on a first-come, first-served basis. (USA Today)
• The backs and forths continue in Washington, but the latest news is that the White House and Congressional Democrats are nearing agreement on a $450 billion aid package. $300 billion of the aid would go to replenishing the PPP with another $50 billion put into a “small business disaster fund” (I couldn’t confirm if this is the EIDL or not). The Senate schduled a Tuesday session, which indicates that an agreement could come today. (Fortune, The Hill)
• I wanted to dig a little further into the unemployment insurance state-solvency issue I mentioned last week. Tax Foundation reports that 1/3 of the population reside in states that can pay less than 10 weeks of benefits (Sorry California, Texas, and New York). In the article, they answered my question of what happens when a state’s trust runs out. And the answer of course, is loans, usually from the federal government. The government uses a formula to determine states’ solvency levels and the 31 states who exceed that would be able to receive interest-free loans from the federal government. The other 29 states would have to borrow with interest, which could lead to those states employers paying higher unemployment insurance rates long-term. So once again, we’re all in this together.

• A 4/20 small business news roundup wouldn’t be complete without mentioning one of the fastest-growing industries: legal cannabis. Not only is it legal in 33 states, 20 of those states have deemed it an “essential business,” providing new legitimacy to the industry as a whole. Since cannabis is still illegal federally, these small businesses are ineligible for the PPP and any other government sponsored relief package. Luckily for them, sales since the crisis began are at an all-time high. (NPR, CNBC)

Previous Entries:

Friday, April 17 | Thursday, April 16 | Wednesday, April 15 | Tuesday, April 14 | Monday, April 13 | Friday, April 10 | Thursday, April 9 | Wednesday, April 8 | Tuesday, April 7 | Monday, April 6

Masterplans is a veteran-owned business that specializes in providing the highest-level business development consulting located in Portland, Oregon. For 17 years we have helped thousands of entrepreneurs launch new businesses and put their ideas in motion. Now, more than ever, we want to see these same businesses survive the largest economic disaster of our generation.