IOWA CITY, Iowa (AP) — As the federal government prepares to launch a $349 billion loan program to help small businesses survive the coronavirus pandemic, critics have grown concerned that some shops families are evicted.
The Paycheck Protection Program – part of the $2 trillion relief package signed last week – was touted as a way to help local businesses that often form the fabric of communities retain workers and pay the bills. But a broad definition of ‘small business’ in the law means it will be open to far more than high street shops when lenders start processing applications on Friday.
Operators of chains and franchises of hotels, restaurants and branded services with thousands of employees in locations scattered across the United States are eligible. Lobbyists are also pushing the Small Business Administration to generously interpret the law to help sectors devastated by mandatory business closures and stay-at-home orders, possibly making the aid available to international fast-food giants and hosting and allowing individual owners to earn around $10. million ceiling on loans.
While Congress may approve more money later, the program as it stands should run out quickly. This could mean that candidates who have the financial and legal expertise of a large organization might be able to maximize their benefits, leaving little to smaller businesses, especially those waiting or having trouble applying. .
“I’m sure that’s what’s going to happen,” said Lauren Friel, owner of a wine bar in Somerville, Massachusetts, which has been closed for three weeks. “It really makes me angry. It’s outrageous. They will walk away with their pockets full of money.”
Friel said she plans to ask for about $50,000 on Friday to help pay rent and employees who have been laid off, but she doesn’t expect to be successful.
Independent contractors and the self-employed could be particularly affected because they will not be able to apply until April 10 under the direction of the Treasury Department. By then, banks could be overwhelmed with applications.
“It’s hard for me to say this: there’s only $350 billion in this fund. Every major chain of restaurants and hotels is going to get that money. It’s not going to last,” said Ron Feldman, director of development at ApplePie Capital, which helps companies prepare to apply.
“If you want to get that loan, speed is your friend,” Feldman told 2,000 franchise industry executives on a conference call this week.
Underscoring the need for help, the federal government reported Thursday that a record 10 million workers filed for unemployment within two weeks ending March 28.
Jeff Brabant, head of government relations for the National Federation of Independent Business, said he was still optimistic about the loan program’s ability to deliver to traditional small businesses.
“Our tone could change in a week if things don’t go well,” he said.
The program will provide businesses with low-interest loans of around 2.5 times their average monthly payroll. They will be fully or partially forgiven if companies show the money was used to retain or rehire employees and pay certain overheads through June 30.
The law specifies that all catering and accommodation businesses are eligible as long as they have no more than 500 employees at one location. He also said that thousands of franchises recognized by the SBA – such as multi-site restaurants, hotels, gyms and hair salons – will be eligible regardless of their income and ties to large parent companies. Many non-profit organizations, which are not normally eligible for such assistance, are also eligible.
The law states that the maximum loan will be $10 million. But lobbyists representing the chains are calling for the cap to apply to each location – rather than each owner.
The International Franchise Association argued in a letter to the SBA that this would allow the program “to achieve the intended result and have maximum impact.” The letter urged the agency to confirm that franchisors it recognizes — which are the parent companies of major chains from Burger King to Marriott — are also eligible.
The agency is expected to release additional program guidance on Thursday.
Greg Flynn, CEO of the Flynn Restaurant Group, which bills itself as the largest restaurant franchisee in the United States and has more than 1,200 Applebee’s, Arby’s, Taco Bell and Panera locations, said large employers should also be relieved to that they can quickly rehire. workers.
Flynn said he laid off 30,000 of his 48,000 employees as his company’s revenue plummeted 60% within days. He hopes to qualify for 2 1/2 times his $60 million monthly payroll under the program.
“I’m 100% focused on surviving and keeping the infrastructure in place, so our employees can come home,” Flynn said. “With (the rescue) we can do it. Without that, I don’t think we can do it.
Darryl DePriest, who was the SBA’s chief small business office attorney from 2015 to 2017, called the $349 billion “almost like a first installment” and predicted Congress would eventually agree. appropriate more money.
But for now, business owners who are waiting or having trouble submitting their applications could lose out to larger candidates, said Véronique de Rugy, a researcher at George Mason University.
“When we look back at who benefited from it, we’re likely to see that it’s skewed in favor of the biggest of the so-called small businesses,” she said.
