Paycheck Protection Program for Small Businesses During Pandemic Was Flawed: NPR
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Small and struggling. These are the businesses that are supposed to be helped by the Paycheck Protection Program, which provides loans to small businesses hit by the shutdown.
The program has helped many such businesses. But the fine print of the law has not closed all the loopholes. Big business, as we now know, got loans. And, now it looks like businesses haven’t had to struggle to get a loan either.
When Chembio Diagnostics officials heard about the Small Business Administration’s Paycheck Protection Program, they jumped at the chance to get a share of the public money.
And they got it: almost $ 3 million.
The Long Island, NY-based company, which also has offices in Berlin and Brazil, develops and manufactures infectious disease tests. His work includes testing for HIV, Ebola and Zika. Earlier this month, company officials announced that they had obtained emergency approval from the FDA to use a rapid COVID-19 test. This created a huge business opportunity for them. Their stock price has gone from an average of around $ 5 last year to around $ 11 this week. The paycheck protection loan was the liquidity the business needed to grow.
“In order for us to be able to increase our manufacturing capabilities, we felt that having this extra amount or this loan would be very helpful … to help us,” said Gail Page, Chembio board member and former CEO. acting. “When you get these pandemics, all of a sudden there’s this big rush and you’ve got to be able to deliver.”
The problem is, the program was not designed to help businesses grow. It was meant to save small businesses, nonprofits, and the self-employed who struggled to make their payroll or pay for benefits and utilities. Companies or organizations that would otherwise have to fire people. And because the loan money will run out – the entire $ 660 billion after the two rounds of the PPP program are over – every dollar that goes to a business that is thriving in the current crisis is not going to one of the small, struggling businesses supposed to be helped.
“The goal here is not to increase the size of companies,” said Marc Goldwein, senior policy director of the DC-based Committee for a Responsible Federal Budget. “The goal here is to keep them alive as we go through this crisis.”
Goldwein says it is not acceptable for companies to participate in the program when they are actually benefiting from the coronavirus: “Companies have to self-certify that they need this money because they are experiencing adverse effects. “
Page says it was entirely appropriate for his company, which has obtained government grants over the years to work on the tests, to take the money from the paycheck protection.
“When you have a crisis like this, a lot of your customer base that you depended on for your income, it kind of slides out here,” she says. “In order for us to remain viable, we felt we had to participate.”
One problem with the first round of disbursements was that the law was murky. Senator Rick Scott, R-Fla., Expressed concern in a written statement last week that businesses unaffected by the pandemic had found loopholes and secured millions of dollars in loans. Much of these loans will be canceled by the government if used properly.
“Congress should make it clear that PPP loans will only be available to companies that show a substantial reduction in revenue due to the coronavirus,” Scott said.
Authorities on Monday began issuing a second round of disbursements totaling $ 311 billion. Goldwein says the question is whether the mistakes will repeat themselves.
“In this next round of funding, it looks like the SBA will be doing additional oversight,” he said.
Treasury Secretary Steven Mnuchin told companies that have received loans but may not have qualified that they have a grace period to repay them. About $ 2 billion has been refused or refunded so far, according to SBA administrator Jovita Carranza. This money will now be available in this second round of loans, she said.
When asked if Chembio would repay the nearly $ 3 million loan, Page said the company would “monitor the situation.”