Small business owners around the country are scratching their heads amidst their broader panic about the news that the Paycheck Protection Program funding has run out. According to COVID Loan Tracker, which has tracked the applications of 15,000 small businesses totaling over $5 bn in PPP loans, only around 6% of companies have actually had loans deposited in their accounts. Many small businesses are wondering “where is the money?”, says COVID Loan Tracker co-founder Rita MacDonald-Korth.

PLEASE HELP SMALL BUSINESS OWNERS BY FILLING OUT THE SURVEY

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.

The two founders of the site report that they have had extensive communication with banks and lenders over the last ten days and the huge difference between “approved” loans and disbursed loans can be accounted for by the behavior of borrowers, the banks, and the SBA.

“The speed with which the PPP program was designed led to inherent flaws and misaligned interests that have caused huge bottlenecks in deploying funds to small businesses”, says Duncan MacDonald-Korth. According to MacDonald-Korth, the problem is that the poor initial guidelines for banks and the “first come first serve” nature of the program, made borrowers apply to many banks/lenders at once. Because of that “there was double to triple the volume of applications as actual businesses applying”. This caused an apparent cascade of issues.

Firstly, it compelled banks to submit applications to the SBA for approval before they were actually complete. Because banks get paid a 1-5% fee for processing the loan, they want to make sure they process it and not a competitor. Accordingly, with so many duplicate applications, it made sense for the banks to urgently submit applications to the SBA—in order to win approval versus other lenders—even if all the paperwork was not in order. The SBA, in turn, had to make sure it was not approving duplicate applications, so it had double check each application flowing in, slowing down the process. All of this leads to the situation we have today—money entirely exhausted, but the vast majority of it not paid out because banks are still getting the proper paperwork from borrowers.

PLEASE HELP KEEP THE DATA FLOWING

It is now official, the Paycheck Protection Program has exhausted its entire $349 bn. The announcement came yesterday that all the money in the program has been “approved”. However, that announcement left small business owners in confusion, as data shows very little money has arrived. According to COVID Loan Tracker, less than 6% of small business owners say that they have actually received money.

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

Small business owners are having trouble reconciling the difference they see between the SBA’s numbers and the lack of money they see in their accounts. The SBA has done little to clear up the confusion, as they have not made actual loan disbursement data public. “Where is the money? That is what all small business owners are asking us. We are getting thousands of those emails a day.”, says Rita MacDonald-Korth, co-founder of COVID Loan Tracker.

HELP COVID LOAN TRACKER KEEP THE DATA FLOWING

(New York)

A famous contrarian fund manager, Alan Lancz, put out a very interesting quote today. He said that “The next 45 days may just become the most critical period in U.S. financial history”. He argues that the manner in which the US economy is reopened will dictate the direction of the next several years of the recovery. In his view, even the best case scenario is a U-shaped recovery where it will take a long time to get back to where we were. In his words, “The much talked about ‘V’ shaped recovery is no longer in the equation because of the unprecedented combination of negatives with this crisis”.

FINSUM: We can’t help but agree. This lockdown has lasted so long—and will likely continue for a while longer—that we can’t imagine we will be back to February 2020’s economic output level until 2022.

(Washington)

While many readers often accuse us of having one political persuasion or another (we get accused by both sides all the time!), we try to be pretty neutral about politics here at FINSUM. On this particular topic, we want to weigh in very clearly (even though we don’t, have a clear position). Earlier this week, the President said what was easily the most heartfelt, eloquent and “presidential” comment of his presidency, and given this topic, we think it is worth sharing. He said “I have it make the biggest decision of my life, and I only hope to god I get it right”. Well, his view was made more clear today, which is that he is favoring a quick reopening.

FINSUM: In our view, nobody knows the right answer to the question about balancing the risk to life versus the imperative of providing economic security. In many ways it is a catch-22. We think a really well-considered strategy is needed.

Earlier this week, the Small Business Administration released aggregate details about the amount of loans “approved” in each sector and each state for the Paycheck Protection Program. However, the document did very little to help business owners understand where their money is, says COVID Loan Tracker.

“Approved” has become a very vague term as it concerns the SBA. COVID Loan Tracker says it has received hundreds of emails from small business owners who say that they have received notices of “approval” but have then waited several days before receiving money, or still have not received it.

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 release of the data by the SBA does help gain insight into which sectors and states will ultimately receive money, the agency has been reticent to release the numbers of actual loan disbursement (i.e. money actually paid out). This figure would be much more illustrative of how the PPP loan program is proceeding.

For instance, the document does not lend any clarity to the percent of applications that have been paid. According to COVID Loan Tracker, that figure stands at just 5%, a far cry from the ~70% the SBA says has been “approved”. “Where is the money”, says one of COVID Loan Tracker’s founders, Duncan MacDonald-Korth.