PAYMENT Protection Program (PPP) loans are taxpayer dollars being given back to small businesses to support them and their workers as they hemorrhage money due to coronavirus.
With 22 million Americans filing for unemployment, the historic government bailout was supposed to be a lifeline. Here's what we know.
What are PPP loans?
Payment Protection Program (PPP) loans are the $349 billion worth of forgivable loans that have been set aside by the US treasury to help small businesses pay their employees during the COVID-19 crisis.
The aim is to allow the businesses that are worst affected by coronavirus to still pay their employees.
The scheme kicked in April 3 for small businesses (<500 employees) and sole proprietorships, and April 10 for independent contractors and self-employed people.
If businesses continue to pay their employees for eight weeks, the government is forgiving the loans.
What are businesses supposed to do with the money?
The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made.
At 1 per cent interest, the forgivable loan guarantees that employee and compensation levels are maintained, saving a lot of jobs as over 22 million Americans have lost their jobs since coronavirus hit the US.
The wage compensation is capped at $100,000 annual salary per employee.
The total PPP is capped at $10 million per business.
Although many publicly traded companies received the large loans, the Small Business Administration showed the typical loan was $206,000.
You can find the full information from the treasury here.
What's the problem?
The money, that was supposed to be distributed on a first come first served basis dried up earlier this month.
Due to the terms of the bailout program, large companies and chains have been able to use loopholes to cash in.
At least 90 major companies took over $400 million in aid.
This was allegedly aided by lenders allegedly "reshuffling the queue the PPP applications it received and prioritizing the applications that would make the bank the most money."
For example, a single loan of $10 million to a large company like ShakeShack gives the bank $100,000 in interest.
These large companies that do not need the money have been cashing in and soaking up large chunks of the pot, leaving the people it was meant for penniless in spite of doing everything they were supposed to.
Trump told the press that he will get the money back personally.
Which large companies received PPP loans?
Large companies are defined as having market values in excess of $100 million.
These companies should not be taking these loans because, unlike most small businesses, they have extensive capital to fall back on instead of taking from the taxpayer.
In addition to the 9 companies that received $10 million, 4,400 companies were approved for loans that exceeded $5 million, according to data from the Small Business Administration that was released last week.
Shake Shack also took $10 million but has said it will return it after public backlash, falling back on its $100 million capital instead, according to CNN.
Here are the top 20 offenders that soaked up PPP loans and deprived the businesses the money was meant for, along with their capital and the money they took:
Who approves PPP loans?
Businesses apply through Small Business Administration lenders, like most banks.
Four of America's biggest banks have been accused of harming thousands of coronavirus-hit small businesses by unfairly prioritizing emergency loan requests from large customers to earn fatter fees, according to CNN.
Bank of America (BAC), Wells Fargo, JPMorgan Chase and US Bank were sued Sunday for allegedly failing to process forgivable loans in the $349 billion Paycheck Protection Program (PPP) on a first-come first-served basis.
Each bank "concealed from the public that it was reshuffling the PPP applications it received and prioritizing the applications that would make the bank the most money," each of the four lawsuits said.
When will PPP loans be funded?
The program is open until June 30 2020, with another $300billion to be injected soon.
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