The US paycheck protection program is a mess. This is how we know.

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President Trump tweeted Thursday that the Small Business Administration Paycheque Protection Program was short of money. He urged Congress to complete the program, which will lend money to small businesses which, if used to pay wages, will be forgiven. A new business may be imminent.

It only took 13 days for loan applications over $ 340 billion. It’s impressive.

The problem is, a lot of the money has gone to big business because, in part, oddities of the way the law was written. And when large companies – which trade on the stock exchange and have access to traditional debt and equity markets – use SBA PPP, it drains resources from companies most in need.

Car dealers, for example, can apply for loans. Even though they are part of large organizations such as Penske Auto Group (ticker: PAG) or Auto Nation (AN) they are eligible as applications are made at the franchise level. Penske employs approximately 27,000 workers. Auto Nation has approximately 25,000 workers. This is well beyond the program limit of 500 workers or less.

A Wall Street analyst as well as an attorney working on SBA loan applications, the two groups of confirmed auto dealerships applying at the franchise level may reach the 500 employee threshold for PPP loans. Both asked not to be identified by name.

Penske and Auto Nation did not respond to a request for comment on the PPP program or whether they applied. According to SBA data, about $ 30 billion in loans, or about 9% of the SBA’s total, went to retail. There are no more details about the industry available.

Additionally, 44% of SBA loans went to 4% of loan seekers. This represents around 67,000 applications taking up almost half of the resources. There are approximately six million small businesses with less than 500 employees in the United States.

Erika Atkins, the Westchester based massage therapist who spoke with Barron recently applied on April 4 for a PPP loan. It still has not been approved.

Some of the smaller businesses are now turning to home service to stay afloat. A Westchester County dog ​​groomer, who asked not to be named, attempted to reopen recently to deal with protests from local citizens. She started grooming one or two animals a day at home to make ends meet. She has applied for a PPP loan but has not yet received a response.

A New York barber, who also asked not to be identified, is not following the home route, refusing haircut requests for fear of spreading the virus. “The decision is difficult, especially to say no to cash. I am married, we have a 7 year old child and if they stop school for the rest of the year it will complicate things even more, “he said. Barron. He does not know whether his employer applied or not.

“The vast majority of these loans, 74% of them, were for less than $ 150,000, demonstrating the accessibility of this program even to the smallest businesses,” read the SBA’s Friday press release reviewing program statistics.

That’s right, and it’s a good thing, but regulators also need to pay attention to the size distribution of loans.

For car dealers, having access to repayable debt could actually help stocks. The five largest publicly traded traditional US auto dealers — Auto Nation, Penske as well as Lithia Motors (LAD), Group 1 Automotive (GPI) and Asbury Automotive (ABG) — are down 38% year-to-date , on average, much worse than the 15% and 11% respective declines in the Dow Jones Industrial Average and the S&P 500 over the same period. Additionally, the group is trading for roughly 8 times the estimated 2021 earnings.

Auto dealerships have a lot of debt – to finance cars in showrooms – and investors are unsure whether the SBA loans, as well as the cash-for-clunkers programs suggested by the Morgan analyst Stanley Adam jonas, could give the sector a boost in the short term.

Cash-for-clunkers was a financial crisis era program that encouraged people to buy new cars when exchanging older models.

Write to Al Root at [email protected]

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