Paycheck Protection Plan- The Classic 80/20, oh no wait, 95/5 Rule!
So, what happened? $349 Billion gone in days. Who got all this money? Why didn’t it get to the Business owners that need it? I know very few true Small Business owners that actually got approved and did receive funds. From all the news sources, 1.6 Million Business owners were approved. Well that’s only 5.3% of the 30 Million that were expected to obtain funds. Bottom line, the intentions of the program are valiant, but not structured properly to truly get the funds in the hands of the business owners that need it the most. Hey Government officials, look at the data again and restructure PPP to help the real business owners that need it.
Circa 85% of the small Businesses in the US have under 100 employees. These businesses do not have the luxury of obtaining liquidity relationships with the big money center banks such as Chase or BOA. While they may have checking accounts for normal operations, very few have loans with these big banks, much less run payroll through them. But yet, loans were clearly prioritized towards larger bank clients with existing relationships.
95% of the PPP loans went to businesses, that while I am sure they needed help, are not what I call small businesses. PPP was framed for businesses with 500 or fewer employees. Well let’s do some math here. If you’re a business with 400 employees and let’s assume payroll, benefits, etc., are an average of $50K per annum, per person. That’s a $20 Million annual payroll. A business running that size payroll is not what I call a small business, more a mid-size one and would have been eligible for circa $4+ Million.
The Businesses that need the help are the ones with fewer than 100 employees. Very few, if any of these got PPP. Couple this with the disastrous rollout of the program, the massive volume and lack of clear requirements for both submission and forgiveness, lenders not accepting applicants etc., and we have a recipe for true disaster as all are experiencing RIGHT NOW.
Our fabulous paid public servants, if they are even working, are gearing up for an increase of an additional $250 Billion for this program. My prediction is without tailoring these new funds towards where it is needed most, the money will disappear again very quickly. Easy math folks- 30 Million Businesses, if each get $100K, that’s $3 Trillion. Loans are capped at $10 Mill, Let’s wait for the data, but have to believe these businesses with 100’s of employees all got millions. The average loan on 1.6M approvals and to deplete $349B would be circa $218k.
Again- Hey Government officials! Thank you for the intent, but on the next round, please get the funds to where it is needed most!