PPP: So Far, Another Example Of The Rich Getting Richer?

Small Business Hearing Health Care Likely To Be Left Out In The Cold

On Thursday, April 16, literally 14 days after the Paycheck Protection Program (PPP) lenders started receiving small business applications, news outlets across the country were reporting that the $350 billion dollars earmarked by the CARES Act for this program was gone.

Our first question was, “What do you mean, GONE?”  Do you mean that “$350 billion in checks have already been written and thus anyone who didn’t get a check isn’t going to get one (for now)?”  Or, do you mean “Banks have received $350 billion in applications, and so there is no money left for further applications (at this time)?”

In an effort to try and get to the bottom of this, we started sending inquiries out to anyone we could think of to try and get a better understanding of what the situation actually is for all those small businesses that have applied, but have not yet received any funding.  Here’s what this effort has produced thus far:

It Was Never Enough Money

One chain of rural banks serving very small communities wrote $40 million in loans on the first afternoon of the program. This prompted three very serious concerns.  First, if this vast amount of money is going out of the banks doors in a rural area, the funds would never hold out nationally.  Second, the way-too-easy application process with no assessment of solvency or credibility, likely would leave banks on the hook for loans made to fraudulent applicants.  Three, assuming such risk with very little overall interest return is antithetical to normal banking practice.

The Money Is Not Going To Truly Small Businesses

One PPP participating lending institution that we were able to speak to after a week of being put on hold, gave us the following information:

• Big banks got first crack at the funds. Smaller lenders had to wait their turn
• Big banks chose to start with larger companies (i.e., 400 employee type companies with million dollar payrolls) first

In other words, the big banks chose a strategy that resulted in the initial allocated amount going quickly to the smallest number of applicants.

The Los Angeles Times Agrees With The Above Two Observations

And, as if to reinforce these lending institutions observations, this opinion article appeared today (April 18) in the Los Angeles Times.  Some key highlights of this article are:

• Fewer than 6% of applicants have received their loans
• The vast majority of the nations 30.2 million small businesses have been left flapping in the wind
• In the hospitality industry, an industry particularly hard hit by stay-at-home policies, only 9% of loans have gone to that industry.  And, this includes:
  • A $10 million dollar loan to Potbelly Sandwich Shop, a publicly traded company with 474 locations and 6,000 employees (the PPP employee limit is – reportedly – 500)
  • A $20 million dollar loan to Ruth’s Chris Steak House. (the PPP loan cap is – reportedly –  $10 million.) It subverted the loan cap by by applying through two subsidiaries, according to the SEC filing.

Meanwhile, actual small businesses that have correctly and prudently applied for PPP and even disaster relief aid have seen nothing. Jill James, owner of small business consultancy Sif Industries, when asked if the PPP is providing relief for small businesses stated, “No, this has not been an effective program to put money in the hands of small businesses.”

The reason why this is important to us is that independent hearing care practices are not the “Pot Belly Sandwich Shop” or “Ruth’s Chris” of our industry.  They are like the many small restaurants and sole-proprietor business in the hospitality industry that have been left “flapping in the wind.”

At this point, it seems that waiting for or depending upon any PPP help for independent hearing care practices is likely folly.  Yes, there may be another round of funding.  In fact, the banks seem to be counting on it.  But, if the strategy currently being used by banks of distributing that money to larger companies where the risk is less for them continues, its hard to picture even the next round of funding reaching the actual small businesses who actually need it.

Perhaps your congressperson and senators need a reminder as to who the PPP was – reportedly – meant to help.