All the buzz in the small business world today is about Congress’ new PPP funding package. The $484 bn deal gives $310 bn to helping small businesses as part of a continuation of the Paycheck Protection Program. It also sets aside some of that money to be processed specifically through small banks.

COVID Loan Tracker was started by small business owners Duncan and Rita MacDonald-Korth to help their fellow small business owners understand when PPP and EIDL advance money starts flowing. The site works by crowdsourcing knowledge on applications and loan disbursements. Our goal is to help the small business community and empower journalists with the data they need to keep the government accountable.

PLEASE HELP SMALL BUSINESS OWNERS BY FILLING OUT THE FORM

While the deal may be a sigh of relief to small business owners waiting for money, it does not go nearly far enough. Firstly, on the positive side, it does give billions of Dollars to be processed through small banks, which clearly did a great job the first time around. COVID Loan Tracker’s stats show that 82% of all successful PPP money was processed by small banks.

However, the new program does not allocate money specifically to companies of a certain size, which means the free-for-all of “first come first serve” will continue to disadvantage small companies. Bigger small businesses (up to 500 employees) have extensive accounting staff and sterling paperwork, which means they will once again be able to submit applications much more quickly than genuine small businesses. The program needed to have a feature which made sure “X” Dollars were allocated to genuinely small business, such as those under 25 people.

So, yet again it looks very much like the PPP won’t help the small businesses that need it most.

Treasury Secretary Mnuchin thinks $310 bn towards a new Paycheck Protection Program will be enough to satisfy remaining demand. We at COVID Loan Tracker think he is sorely mistaken.

The government and the SBA in particular have continually mentioned a figure of around 1 million applications that were in-process but stranded by the first round of the program running out of money. Based on that calculation, the logic for the size of the new program is very simple: if $349 bn funded 1.7 million applications in the first round, then surely $310 bn will fund the remaining 1 million applications that got stranded.

PLEASE HELP SMALL BUSINESS OWNERS BY FILLING OUT THE FORM

Unfortunately, this assumption grossly underestimates the real number of stranded applications because it does not account for “shadow applications”. Many small business owners never had their applications formally submitted to the SBA for an E-Tran number because they were still collecting/correcting/submitting paperwork that was requested by their lenders. Many applicants did submit all paperwork, but because of faulty systems, their applications were never submitted. Both founders of COVID Loan Tracker had this happen to them on multiple application platforms despite applying the first day, and thousands of small businesses have shared similar stories with us.
Because of this,

COVID Loan Tracker believes there are closer to 5m stranded applications—mostly from genuine small business owners who lacked accountants and did not have perfect paperwork at-the-ready. Even counting shadow applications, there are also small business owners who simply did not apply because the money ran out so soon—meaning even more applications are forthcoming. Accordingly, we believe demand for the new round of PPP will be extremely high and that funds will be exhausted in 7-10 days.

COVID Loan Tracker was started by small business owners Duncan and Rita MacDonald-Korth to help their fellow small business owners understand when PPP and EIDL advance money starts flowing. The site works by crowdsourcing knowledge on applications and loan disbursements. Our goal is to help the small business community and empower journalists with the data they need to keep the government accountable.

(New York)

The markets are not reflecting it, but sometimes it feels as though the writing is on the wall. The economy is bound to get worse before it gets better. We have been locked down long enough now that consumer habits are shifting and the spending patterns that prolong recessions are taking hold. Total US credit card debt has fallen 5% in five weeks—the fastest fall since the Great Recession. Auto loans are the same. On the whole, the more data comes out, the worse the picture gets.

FINSUM: Job losses have not yet peaked, so we are not even close to being on the road to recovery. We suspect it is going to take a long time to get back to where we were in February. We expect this will be a very wide U-shaped recovery.

(New York)

LPL has debuted a new model for breakaway advisors. The firm has decided to act on something long known—the logistics for setting up a new independent business are a major hurdle for wirehouse advisors who are considering breaking away. Accordingly, they have set up Strategic Wealth Services, which will handle all office set-up logistics for LPL and make sure there are zero out-of-pocket costs.

FINSUM: Kestra has also launched a similar service. Honestly, sounds like a smart play to smooth the transition, but watch for the “catch”, which isn’t apparent yet in what we’ve seen on this.

(Houston)

The oil market has been the story of the week for markets. The price of black gold fell to -$37 dollars on Monday. The market would technically pay you to take oil off its hands. Even at $20, most of the US oil industry is out of business, so what can the President and the government do to save the market? There are several options. For instance, the government could buy a hundred million barrels of oil for its strategic reserve, or it could create new storage space. However, the option the markets favor is for the government to buy mountains of oil while it is still in the ground, and have producers pay them back as they extract it.

FINSUM: If the government wants to save the US oil industry from a mass bankruptcy—and resulting rupture in the high yield market—it will need to take action.