Big problems for small-business loan program

It’s hard to believe that the Party of Trump would dare, politically, to not get this worked out. But we’ll see.

Under the policy, any business (or nonprofit, veterans organization, or tribal concern) with 500 or fewer employees is eligible for a government-backed loan equivalent to eight weeks of its prior average payroll, plus an additional 25 percent of that sum (unless that grand total adds up to more than $10 million, which is the cap for any individual firm). And these loans are really more like grants, which means free money: Firms don’t need to make any payments on their loans for six months — and if they maintain their workforces, then the government will forgive almost all of the loan (more fine details on this point below). The idea is to keep the small-business sector frozen in place, so that it can rapidly defrost once the coronavirus pandemic has passed.

But you can’t freeze something for later if it’s already spoiled. And many small firms directly impacted by social-distancing measures were already collapsing by the time Congress finally passed legislation. For these reasons, the Trump administration was eager to get the PPP up and running as quickly as possible. To that end, the administration has (1) made it possible for small-business owners to secure government-backed loans at any federally insured lender that wishes to participate in the program, regardless of whether such banks or credit unions are affiliated with the Small Business Administration, and (2) officially launched the program April 3.

Unfortunately, the small-business bailout season is off to a shaky start — and for entirely predictable reasons. - New York Magazine