The Small Business Association’s (SBA)’s Payroll Protection Program (PPP) handed out loans to small businesses, but it isn’t just small businesses getting the loans. Criticism of the program continues as officials released details on hundreds of thousands of businesses that received PPP loans from the SBA, many of which will be forgivable.
The Payroll Protection Program was designed to bail out small businesses impacted by the pandemic, but many firms that took the bailout money weren’t impacted by the pandemic.
The SBA’s PPP loans were supposed to be for small businesses that had to shut down during the pandemic. However, many large businesses, including asset management firms that didn’t actually shut down, are taking the loans.
According to ABC News, about $27 billion in PPP loans from the SBA went to the financial services industry. A few banks took the money, but most of it went to hedge funds, financial advisors and securities brokerages.
Real estate investment companies also received a large chunk of the loans. The payday loan and title loan industry, which lends money at exorbitant interest rates to distressed consumers, also borrowed millions of dollars from the government. Most of the money will be forgiven or have an ultra-low interest rate of 2% attached to it.
Private equity firms and portfolio managers also took money from the SBA’s PPP. Rosenblatt Securities, one of the largest firms on the floor of the New York Stock Exchange, took a loan valued between $1 million and $2 million.
Other investment firms that received PPP loans from the SBA include Highland Capital, Angel Oak, Kerrisdale Advisers, Rothschild Capital Partners, and Kellner Management. A review of other asset management firms included names like Meritage Asset Management, Cambria Asset Management, Bruderman Asset Management, HGK Asset Management, and McLean Asset Management. There are thousands and thousands more of such names. Marcato Capital Management and BlackGold Capital Management, both of which are quite large, also received funds.
The Wall Street Journal also notes that the SBA said in April that hedge funds and private-equity firms were not eligible to receive PPP loans from the SBA because they were “primarily engaged in investment or speculation.”
CNBC reports that many other well-to-do firms and businesses took PPP loans from the SBA. For example, the Boies Schiller Flexner, a law firm that represents powerful clients like Vice President Al Gore in the Bush v. Gore Supreme Court case, received a loan between $5 million and $10 million.
A business owned by the family of Senate Majority Leader Mitch McConnell’s wife Elaine Chao, who is the transportation secretary, received a loan worth $350,000 to $1 million. Agriculture Secretary Sonny Perdue founded Perdue Inc., a trucking company that received a $150,000 to $350,000 loan.
Political organizations, which also may not have seen any financial impact from the pandemic, also received sizable PPP loans from the SBA. The Ohio Democratic Party received at least $150,000, while the Florida Democratic Party Building Fund received at least $350,000. The Women’s National Republican Club of New York received at least $350,000, and the Black Republican Caucus in Florida received at least $150,000.
The Wall Street Journal also reports that many companies backed by venture-capital firms also took PPP loans. The question about these firms is why they would need forgivable PPP loans from the SBA since they have access to venture capital. Getaround, which is backed by Softbank’s Vision Fund, and Reputation.com, which is backed by Kleiner Perkins, are two venture-capital-backed firms that received funds.
Mistakes in the SBA’s PPP loans database
The data released by the SBA may not be altogether trustworthy. According to CNBC, some small businesses say the database contains some major errors.
For example, venture capital firms Index Ventures and Foundation Capital all said they didn’t apply for the Payroll Protection Program even though the database says they were approved for millions of dollars in funds. A spokesperson for Index Ventures noted that the listing in the database doesn’t even have the correct address or information about the fund.
A woman who resides near Milwaukee told CNBC that she was surprised to see her name in the database as having received a loan between $5 million and $10 million. Seventy-two-year-old Geraldine Brimley applied for a PPP loan of about $9,300 and received less than $2,300.