Analysis: Washington won't fix flaws in small-business loan program

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Analysis: Why Washington won't fix design flaws in small business loan program. - jonallendc / SRuhle

For banks, which were drafted into the position of making the loans, it made sense to give first to the most creditworthy applicants. They were understandably reluctant to lend federal money to borrowers who might not be able to pay it back or accept the potential for liability in cases of fraud. That gave a leg up to businesses, regardless of size, that had borrowed from the bank before and paid their debts or those that weren’t likely to go bankrupt because of the coronavirus crisis.

For companies in good standing, it’s hard to turn away cash. The government will forgive any portion of the loans, which range up to $10 million apiece, for businesses that keep at least 90 percent of their workforce on payroll. And the interest rate for portions of loans that aren’t forgiven is 1 percent.

Moreover, he said the program’s biggest design flaws include a yawning gap between the large number of small businesses — roughly 30 million in the country — and an amount of total funding that can’t come close to serving them all, as well as criteria that crowded out small businesses based on their sector of the economy or their inability to precisely meet requirements for spending on payroll vs. other overhead costs.

 

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jonallendc SRuhle zcuskelly

jonallendc SRuhle That will take too long

jonallendc SRuhle see the 'Republicans' side of this chart

jonallendc SRuhle

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