127 First-hand Accounts of the PPP Process

April 24, 2020
Categories:

Thanks so much to everybody that heeded the call from my last email to share their experience going through the PPP process. 132 entrepreneurs filled out the survey. Below are some numbers to help you understand the companies that filled out the survey (respondents) and what their experience has been.

Did your savvy friend forward this to you? Subscribe here for updates about the impact of stimulus on entrepreneurs.

Stimulus Stats

79 – 79 percent of respondents were for profit, 21 percent were nonprofit.

80 – Over 80 percent of respondents have annual revenue of $5M or less and 50 or less employees.

90 – Over 90 percent applied at a bank they previously had a relationship with.

43 – 43 percent applied for a PPP loan of $50,000 or less. 

18 – Only 18 percent have been funded.

Entrepreneur’s PPP Experience

So, what have we learned from the survey? (1) Most respondents were genuine small businesses. The vast majority of companies in the sample had $5M or less in revenue and 50 or less employees and were asking for relatively small amounts of capital. (2) Low Funding rate. Over 80 percent of applications have not been funded. This isn’t too surprising to me. The program is literally free money. It was rolled out incredibly quickly without clear government guidance and administered by banks that all have their own policies and priorities. Given these conditions, this disastrous rollout could have been predicted. Now the PPP funding is tapped. We’ll see if it gets replenished and whether the SBA and banks can get it together. (3) Frustration. You can read through all of the entrepreneurs’ narrative. If I could summarize them in one word it would be: frustration. I think this largely stems from a lack of clarity on the process (see above). Additionally, the frustration is rooted in the seeming arbitrary nature of the process. Your shot at funding was tied to how your bank chose to roll out the program, which varied widely. Lastly, it seems possible / likely that larger “small businesses” may have been given priority at the expense of true small businesses. The banks were certainly financially incentivized to service the bigger loans. This has sparked lawsuits against the major banks (see below). Take a moment to read through some of the entrepreneurs’ narrative description. I’ve organized the data so you can review and sort by bank, employee size, revenue, etc. I hope this is helpful. Looking forward to any feedback. Click here to see the data.  

$1T

The White House and Congress on Monday tried to design another giant bailout package aimed at combating the coronavirus pandemic’s economic and health fallout, scrambling to resolve last-minute snags over loan access and testing.

“We have I believe come to terms on the principles of the legislation, which is a good thing, but it’s always in the fine print,” House Speaker Nancy Pelosi (D-Calif.) said on CNN Monday evening. “And so now we’re down to fine print, but I feel very optimistic and hopeful that we’ll come to a conclusion.” Votes on the agreement are expected as early as Tuesday afternoon in the Senate and Thursday in the House. If a deal is reached, the nearly $500 billion measure would become the fourth virus-related bill rushed through Congress in just two months at a total price tag of almost $3 trillion. The new measure would seek to devote an additional $310 billion to the Paycheck Protection Program, an initiative created by last month’s Cares Act that was initially funded $349 billion but has since run dry. Banks are warning their customers that even if Congress provides an additional $300 billion by this week, they may not be able to provide loans to small businesses. They say the program needs closer to $1 trillion to meet demand. If that’s true, than this package will still leave 70% of the current applicants without funding. Washington Post

Bank Backlash

Bank of America, JPMorgan Chase, U.S. Bank and Wells Fargo are being sued by small business owners, who claim the big lenders unfairly favored companies seeking higher loan amounts under the government-backed Paycheck Protection Program. Each bank “concealed from the public that it was reshuffling the PPP applications it received and prioritizing the applications that would make the bank the most money,” according to language appearing in all four of the class-action lawsuits, filed Sunday in the U.S. District Court for the Central District of California. “Had [the bank] been honest, small businesses could have (and would have) submitted their PPP applications to other financial institutions that were processing applications on a first-come, first-served basis,” the lawsuits say. The plaintiffs say data in regular updates from the Small Business Administration suggest the banks front-loaded applications for larger loans and focused on loans for $150,000 and under at the tail end of the program before it lapsed. A federal judge last week defended a controversial move by Bank of America to restrict the pool of small businesses that could receive PPP loans. The businesses that sued Bank of America are planning to appeal. Politico

Shack Back

Shake Shack, the popular burger chain founded by celebrity chef Daniel Meyer, said that it would be returning the $10 million it received from the Payment Protection Program after the company faced intense criticism for applying for the emergency financing intended for small businesses. “The money will go back in the fund. However, new loans can’t be made against those funds until Congress authorizes new funds,” said Jennifer Kelly, a spokesperson for the Small Business Administration. Anybody else hungry for a burger?  Forbes

Questions?

If you have any questions about the PPP or EIDL programs, let me know by clicking here. I’m working on a master FAQ.