Congress will vote on a $484 Billion stimulus plan later this week which includes $250 Billion for the Paycheck Protection Program (“PPP”) and $60 Billion for the SBA’s Disaster Relief Fund.
Congress and the Trump administration are racing to approve this stimulus package. The speed to execute this stimulus is driven by the fact that both parties want to complete the deal so that they may focus on the general election campaign (tail wags the dog).
- This politically motivated rush makes it impossible to measure the effectiveness of the original SBA relief on small business.
- We know that hedge funds and venture capital firms applied for PPP funds (not the original intent of the SBA program).
- We know fraudulent applications exist in the system.
- We know that the SBA and banks have made technology integrations over the past several weeks to improve the loan application and capital dissemination process (still not perfect).
- We do not know the impact of the original SBA/PPP tranche as insufficient time has elapsed to where all applicants have received their portion of the original PPP and what the outcome is for those recipients.
- How many small businesses have since closed their operations despite receiving funds from PPP Part 1?
- How many small businesses will close after applying for PPP Part 2 but before receiving the capital?
- Wasted capital has to be billions of dollars when you consider fraud and capital allocated to businesses that have since closed for business. Not to mention businesses that have applied for and received capital (hedge funds and VC firms), that was intended for standalone small businesses. This will for sure result in incremental business failures.