PPP Loans, Cash Crunches And Now, The Specter Of Public Shame

And now: Stimulus funding as a tool for public shaming.

Depending on how you look at it, the fact that roughly $130 billion is left under the Paycheck Protection Program (PPP) is a testament to either the program’s success or failure.

Maybe the small- to medium-sized businesses (SMBs) the program was and is designed to serve no longer need the money.

Maybe some SMBs, worried that demand wouldn’t come back before the funds ran out, or got cold feet over a lack of clarity about what might not be forgiven, and so said, why bother.

Maybe some SMBs decided this was the time to head for the bunker to reemerge later, or maybe even not at all.

And now, maybe they are worried about tapping into funds — and becoming the target of less-than-wanted (or warranted?) scrutiny.

PPP was a lifeline for SMBs made available in early April and initially designed to help companies cover payroll expenses and avoid layoffs for the two months that everyone, then, thought would be the duration of the pandemic’s lockdown. The program was designed to cast a wide net — and the parameters were very clear and what expenses were eligible to be included — 2.5 times payroll and related expenses.  PPP loan amounts were capped at $10 million.

And quite a wide net of businesses they got. All in all, the U.S. Small Business Administration (SBA) said it had approved 4.9 million loans for a tally of more than $521 billion through its various incarnations. The agency has estimated that the vast majority of loans — at 87 percent — fell below the $150,000 threshold, averaging $107,000.

Now, as has been reported, this week the Trump administration disclosed the names of firms that received loans through the PPP – namely, those firms that took at least $150,000 each. The disclosure didn’t reveal personal details about borrower financial details, but they might have just as well.

With the latest round of disclosures, a number of firms have now been placed in the spotlight for having applied to get a loan under a program that the government encouraged them to tap to keep employees paychecks intact. None of which ever gave permission to the SBA for those details to be disclosed, nor were ever told they could be.

Among those names as relayed by CNBC: Boies Schiller Flexner, the law firm, received between $5 million and $10 million. P.F. Chang’s China Bistro and Chop’t restaurants — received aid of between $5 million and $10 million. Another restaurant, TGI Fridays, has received at least $5 million. The Catholic Charities of the Archdioceses of San Francisco, Washington, D.C., New Orleans and Boston, each received loans at more than $2 million, per SBA data.

The list goes on.

Since debuting on April 3,  PPP had a rocky time of it — and saw tinkering at the margins. Initially, there were delays and technical glitches. Then later in April, Treasury Secretary Steven Mnuchin said any small business getting a PPP loan greater than $2 million would be subject to an audit.

“One of the things that will be required is you will have to show a payroll report that you actually spent the money on payroll and other items that qualify for forgiveness,” Mnuchin told the Wall Street Journal in an April 28 report. If violations were found, Mnuchin said borrowers, not banks would, “face criminal liability for making certifications that weren’t true.”

Then, the fear was a lack of clarity about forgiveness, and the risk of facing an audit — or worse —  prompted more than a few CEOs and founders to say “thanks, but no thanks” and return the money.  As noted in May in a roundtable discussion with Karen Webster about the PPP, Planters Bank CEO Dan Speight said lack of clarity in the details could be dangerous and the fear of legal repercussions could be enough to give SMBs pause.

Maybe even $30 billion worth of pause.

CNBC reported that $30 billion in approved loans had been returned to the SBA, monies that had once been tapped, accounted for and possibly even earmarked to save jobs. Some of those who returned the money — and who were public about it — include Nathan’s Famous, U.S. Auto Parts and Potbelly.

Today, there is more than $130 billion left in the till — and which suggests that there is, still, plenty of PPP to go around. That is, if SMBs want to apply, recognizing that if they do, they’ll more than likely make the next list of disclosures.

There is certainly the need.

A survey earlier this month by Small Business Majority estimated that nearly six in 10 of respondents are “currently struggling” to make their commercial rent or mortgage payments. Meanwhile, 68 percent of small businesses in Small Business Majority’s network have received a PPP loan, but nearly one in four who received a loan (23 percent) did not receive the full amount they requested.

And in a sobering stat: The survey noted that 37 percent report they are likely or “very likely” to be forced to lay off their staff once their PPP funding runs dry.