Small business bailout needs more money, fewer rules

Paycheck Protection Program Is Too Complex Compared to How the $2.2 Trillion Stimulus Package Distributes Money to Less Deserving Big Businesses: Our View


Things are not going well with the government’s efforts to helping small businesses flattened by the coronavirus pandemic. No sooner had he begun to place $350 billion in forgivable loans that he ran out of money. And much of the money hasn’t reached the small businesses that desperately need it. It is, in fact, stuck in banks that struggle to process all the requests and make sense of all the regulations.

The good news is that the Trump administration and leaders of both parties in Congress say they are close to a deal to pump an additional $300 billion into the program and another $50 billion in a related field. The bad news is that the program is too complex and incompatible with more generous packages for large companies approved in another section of recent economic aid legislation.

Certainly, any relief program this large and created so quickly will inevitably run into problems. But the small business loan program – which is really more of a grant program – needs to be greatly simplified because the government can either provide emergency aid to the economy or engage in economic social engineering. He can’t do both.

What the Paycheck Protection Program ignores

Under the Paycheck Protection Program Terms, businesses can get a rebate if they use their 1% interest loans to pay the interest on more expensive loans they might have, but not to repay the principal of those loans. They can use their government loans for rent and utilities, but not to pay contractors or insurance premiums. They must use at least 75% of their loan on payroll. And they must spend all that money within eight weeks of getting their loans, a requirement that makes sense but ignores the fact that some parts of the country are hit harder – or peak later – than other parts. .

Banks have been instructed to try to determine whether an applicant is likely to comply with these and other conditions. Unsurprisingly, they’ve been overwhelmed to the point where many simply aren’t picking up new apps. At least two class action lawsuits have been filed against banksaccusing them of favoring larger loan applicants, rather than processing applications as they come in.

SBA: We have processed over 14 years of loans in less than 14 days

Compare that with how easily the government has handed out money to big business in other parts of the $2.2 trillion stimulus package. Ten airlinesfor example, have already agreed (very noble of them) to take $25 billion. Boeing rated a specific position it could net the company a $17 billion loan.

Big companies like these get money because they’re a convenient way for the government to hand out cash and save jobs in hard-hit industries, not because they necessarily deserve it.

Small businesses make up half of the economy

One of the reasons airlines are in dire financial straits is that they’ve used big profits over the past decade to buy back stock, boost dividends and pay huge salaries to top executives rather than payouts. save for a rainy day. Boeing, meanwhile, cut corners to get its new 737 Max off the groundto see the fleet grounded after two fatal accidents.

Small businesses need more money and fewer rules. They count for nearly half of economic output but only got 16% of $2.2 trillion stimulus package passed last month. And they are pushed through more hurdles than less deserving big companies. This is not conducive to economic recovery.

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