Tag: SBA

The Little Guy Always Gets Hurt

The Daily Escape:

San Juan Mountains, near Telluride CO – January 2022 photo by Ben Clark

The Paycheck Protection Program (PPP) was an unprecedented move by Washington to save jobs and businesses as the country slid into a Covid lockdown in 2020.

The PPP  ̶  included in the $2.2 trillion CARES Act of 2020 – offered low-interest loans to a wide range of businesses to help keep them afloat in the pandemic. The concept was if participants used the cash to cover payroll and certain other expenses, the loans would be forgiven completely.

The Intercept is reporting that Bank of America (BOA), the second-biggest lender in the PPP loan program, is refusing to forgive some small business owners’ loans and is blocking them from getting relief directly from the Small Business Administration (SBA), which oversees the program:

“…in over a half-dozen interviews and emails with The Intercept, small business owners who got their PPP loans through Bank of America described the same experience: A year or more after they first received their loans, they were told that the bank determined they had originally received too much money and that it would only forgive a portion, leaving them to pay back the remainder with interest.”

When those business owners applied to BOA for forgiveness, the bank’s online portal was pre-populated with an unexplained and lower amount of loan forgiveness. The form on the website didn’t allow them to change it, or to upload any supporting documentation showing that they actually did qualify for forgiveness of the full amount of the original loan.

The Intercept reviewed a screenshot from one small business owner who, when she tried to change the figure in a box titled “Requested Loan Forgiveness Amount” from the bank’s figure to the full amount of her PPP loan, it showed an error message. She was unable to move to the next screen. The Intercept says that the borrower’s calls to the bank were fruitless.

More from The Intercept:

“Fearing a hit to their credit scores or defaulting on their unforgiven loans, some small business owners submitted Bank of America’s forgiveness application for the lower amount despite believing that they should be forgiven for the full loan. Others are refusing to apply for forgiveness for an amount they say is less than they deserve.”

BOA reported that many of the problems are related to SBA rules on whether the money could be used to pay contractors, or for suppliers, or for other situations.

After widespread complaints about the slow and confusing forgiveness process, the SBA set up its own portal in August 2021. That allowed small business owners to apply for forgiveness directly with the agency.

But in a typical Catch-22, the banks had to opt into using the SBA’s portal, and BOA is among those that refused to do so. So businesses that got their PPP loans through BOA had no option. They had to use the bank’s portal. In a statement, BOA said the SBA site is redundant:

“If we used the SBA’s site…we would still be required to review each application for forgiveness and provide the recommended forgiveness amount, as we do on our own site.”

The Catch-22 nightmare gets worse: The SBA has an appeal process for PPP loans, but that process doesn’t begin until a borrower submits an application for forgiveness to their bank. That requires accepting Bank of America’s loan forgiveness number.

These small business PPP borrowers say that they followed the rules as they were written at the time they signed the promissory notes and therefore shouldn’t be held accountable for the many rule changes the SBA made after the program launched.

The Intercept cites one case where a borrower, who lives in an economically depressed region, was able to apply for a grant through the Economic Injury Disaster Loans (EDIL) program, also run by the SBA. The EDIL loan gave him a low interest rate and a longer term for repayment.

As soon as he received the EDIL money, he used it to pay off the unforgiven balance of his PPP loan.

It seems that BOA and the SBA have walked away, at least partially, from the original understanding with these borrowers. And some of them, fearing that they had no option to fight the system, and that their credit scores would be hurt, have submitted their BOA forgiveness application at the lower amount. Now they are setting up repayment schedules with BOA for their still-outstanding loan amounts.

Even a useful and well-intentioned program can leave victims in its wake. And it’s hard to climb out of the hole when your banker keeps shoveling dirt on you.

It may have been wrong for Congress to place banks in the middle of the PPP loan program to begin with. Although the SBA has always used local banks as their point of administration and distribution for its lending activities.

It seems that for BOA at least, it gave them an additional profit opportunity!

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Saturday Soother – June 13, 2020

The Daily Escape:

Spring in Grand Teton NP, WY – photo by MaxFoster098

Posting on her Instagram, AOC answered a question that read: “What does an America with defunded police look like to you?” AOC’s answer:

“It looks like a suburb…”

She continued:

“Affluent white communities already live in a world where they choose to fund youth, health, housing etc. more than they fund police. These communities have lower crime rates not because they have more police but b/c they have more resources to support healthy society in a way that reduces crime.

Why don’t we treat Black and Brown people the same way?”

Words to live by.

On to the issue for Saturday. From the WaPo: (brackets by Wrongo)

“Federal officials responsible for spending $660 billion in taxpayer-backed small-business assistance [PPP Loans] said Wednesday that they will not disclose amounts or recipients of subsidized loans, backtracking on an earlier commitment to release individual loan data.”

Since 1991, the Small Business Association (SBA) has previously released detailed loan information for the federal 7(a) program, on which the PPP is based. More from WaPo:

“The SBA initially intended to publish similar information for the new coronavirus-related loans. An SBA spokesman told The Washington Post in an April 16 email that the agency “intend[s] to post individual loan data in accordance with the information presently on the SBA.gov website after the loan process has been completed…”

Treasury Secretary Steve Mnuchin is saying that the Treasury Department won’t disclose the recipients of more than $500 billion in bailout money delivered to 4.5 million businesses through the PPP, because that the information is “proprietary” and “confidential”.

As Charlie Pierce says:

“In one sense, of course, the money is “proprietary information” and we’re the damn proprietors. It’s our damn money.”

According to filings with the SEC, nearly 300 publicly traded companies received $1 billion in stimulus funding. That led to a subsequent ruling from the SBA that public companies with access to credit elsewhere didn’t qualify. Many of those businesses subsequently returned the money, although the SBA has declined to say exactly who, or how many did so.

The reversal on disclosure comes amid a waning belief that the $2.2 trillion pandemic relief package approved by Congress in March will be subject to any oversight. The GAO, which is responsible for preparing a mandated report on the relief spending by the end of June, has requested loan data for both the PPP and a separate program for economic “disaster” loans, but has not been told if or when their request will be honored.

Republicans are not even trying to hide their true intentions any more. The overlap of people who believe in “small government” and people who do not object to Trump’s handing out $500 billion in unmarked bills is total.

But, we’ve had enough body blows for one week. Time to take a few minutes, and escape from all of the world’s chaos. It’s time for our Saturday Soother.

We’re expecting a beautiful weekend in Connecticut, and Wrongo hopes there’s fine weather wherever you are reading this. Start your weekend off by brewing up a cup of Ethiopian Suke Quto coffee ($19/12oz.) from the Greater Goods Roasters of Austin, TX. This is the fourth time they have been featured in the Saturday Soother.

Now, settle back in a physically-distant chair in the shade, and listen to Playing For Change (PFC) perform Marvin Gaye’s “What’s Going On”. The message in his song is as relevant today as it was in 1971:

PFC’s focus is to record musicians performing in their natural environments as part of a series called “Songs Around the World”.

Sample Lyric:

Picket lines and picket signs

Don’t punish me with brutality

Talk to me, so you can see

Oh, what’s going on

What’s going on

Ya, what’s going on

Ah, what’s going on

Those who read the Wrongologist in email can view the video here.

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Stimulus Money is Going to Churches

The Daily Escape:

View of Mt. Rainer from Reflection Lake WA – 2018 photo by NathanielMerz

Here is the 7-day look at the national numbers for COVID-19:

The rate of growth in deaths as a percentage of cases continues to rise, while the rate of increase in cases picked up slightly on 4/6, although overall, it is slowing vs. 7 days ago. Testing is still growing, although the rate of growth in tests is now about equal to the growth in cases.

A little-noticed part of the $2 trillion stimulus package allows the federal government to provide money directly to US churches to help them pay pastor salaries and utility bills. From NPR: (emphasis by Wrongo)

“…the $2 trillion economic relief legislation…includes about $350 billion for the Small Business Administration (SBA) to extend loans to small businesses facing financial difficulties as a result of the coronavirus shutdown orders. Churches and other faith-based organizations are among the businesses that qualify for aid under the program, even if they have an exclusively religious orientation.

So, we’re not simply speaking of not-for-profit subsidiaries of churches such as charities. The Trump administration is saying churches themselves will qualify for direct loans. Apparently, the program is based on the average monthly payroll of a church school or the parish, which is extrapolated to eight weeks. The cost of maintaining staff for that period becomes the loan amount.

From the SBA’s statement:

“Faith-based organizations are eligible to receive SBA loans regardless of whether they provide secular social services….No otherwise eligible organization will be disqualified from receiving a loan because of the religious nature, religious identity, or religious speech of the organization.”…

The SBA’s regulations currently exclude some religious entities. Because those regulations bar the participation of a class of potential recipients based solely on their religious status, SBA said it will decline to enforce those subsections and will propose amendments to conform those regulations to the Constitution.

The SBA is quoting a 2017 Supreme Court decision, Trinity Lutheran v. Comer, which was the first time the Court said the government is required to provide public funding directly to a religious organization. Chief Justice Roberts wrote for the majority in the 7-2 decision. The key argument was that Trinity Lutheran faced discrimination solely because of its identity as a church. That, the Court decided, was discrimination. From the opinion:

“There is no question that Trinity Lutheran was denied a grant simply because of what it is….A church.”

The grant was for refurbishing the church’s playground.

But in this case, the SBA is offering direct funding of religious entities with money provided by tax dollars from the rest of us. We’re likely to see this in the courts soon.

This isn’t the first time that the Trump administration provided funds directly to churches, synagogues, mosques and other religious organizations. In 2018, the Federal Emergency Management Agency (FEMA) changed its rules to make houses of worship eligible for disaster aid.

First Amendment watchers have reacted. Alison Gill, legal and policy vice president of American Atheists said:

“The government cannot directly fund inherently religious activities….It can’t spend government tax dollars on prayer, on promoting religion [or] proselytization. That directly contradicts the Establishment Clause of the First Amendment.”

If they want Federal funds, shouldn’t they pay Federal taxes?

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