The old saying ‘it’s not what you know, it’s who you know’ rings true for many desperate small businesses. When it came to handing out government loans, it appears a big chunk of $350 billion in government money intended to help small businesses went to big companies. Buzzfeed writes:
Several giant companies with hundreds of stores, thousands of employees, and whose executives make millions announced they’d received the maximum possible payouts under the small business program.
“Unfortunately, they were in line as soon as the window opened for this program and took a lot of resources away from those small business owners where this was their only option,” Holly Wade, director of research with the National Federation of Independent Business (NFIB) lobby group, told BuzzFeed News.
Ruth’s Chris reportedly got one of the largest loans from the Small Business Administration (SBA) relief fund. The Wall Street Journal says the “company with more than 5,000 workers, received $20 million in forgivable loans on April 7.”
The company, which operates or franchises 159 restaurants, had a profit of $42 million on revenue of $468 million last year.
The law was written for businesses with 500 employees or less, but as Buzzfeed writes, it “provided some flexibility to restaurant and hotel groups by stating they could apply as long as they had no more than 500 workers at a single location.”
Jihyen Park, the owner of Gotham Florist in New York City, says she applied for an SBA loan to pay her rent but hasn’t received a penny. She points out that if the money Ruth’s Chris alone got “had been given to save REAL small businesses using an average $12,500 per business that could have been 1,600 small business owners breathing a sigh of relief knowing they had a safety net.”
The thing I’m most upset about is that they made us close our businesses. Said we should keep our employees and pay them. I followed all the rules then they didn’t give me any of the loan that I applied for. My landlord wants his rent money. He says he’s in the same boat as me. He has a mortgage and employees to pay. There’s no way some of the small businesses will be able to survive this. Especially in nyc where the rent is so high.
House Small Business Committee Chairwoman Nydia M. Velázquez (D-NY) issued the following statement on the status of funding for the Paycheck Protection Program:
“Unfortunately, during the program’s rollout, we have seen one mismanagement after another from the Trump Administration. From a lack of clear guidance for lenders to reports of large corporations being awarded loans, we simply cannot continue to pour taxpayer money into federal programs without increasing guardrails, promoting transparency, and expanding opportunities for the most underserved small businesses.”
Miami, Florida CPA Steven Dohan says his clients “are appalled at how Ruth’s Chris and others apparently found a way to game the system.”
We helped our small business clients apply for more than 30 loans. Only 7 were funded. These are businesses that applied within 1-3 days after opening for applications. Now many who did not get relief may go out of business or take months to recover. One question we have is, did banks go to their biggest clients first?
This past week Congresswoman Donna Shalala (D-FL) was appointed to serve on the Congressional Oversight Commission tracking stimulus money. Shalala told News & Guts:
“In a law as complex as the CARES Act ( ‘Coronavirus Aid, Relief, and. Economic Security Act), there are always going to be areas that need to be fixed. The goal of this legislation was to ensure that small business owners forced to shut down because of this pandemic would have a lifeline to keep their employees on payroll and their businesses alive.”
As for what happens next, Shalala says:
“In my role as a member of the CARES Congressional Oversight Commission, I plan on doing everything I can to root out abuse of the system and get America’s small businesses the help they were promised.”