As of Wednesday, New York had nearly one-third of the 822,572 reported cases of the coronavirus and more than 43 percent of the 46,054 deaths in the United States.
So you might naturally have thought that New York companies would receive a comparable share of the $349 billion in Paycheck Protection Program funds intended to help small businesses keep their employees and stay afloat.
You might also have expected that hospitality businesses – including restaurants, bars and hotels – that have suffered the highest rate of job losses in a month in which nearly 17 million Americans filed for unemployment would receive their fair share.
But if you thought that money for that program, like other stimulus programs, would go to businesses in the hardest-hit state in the country and the hardest-hit businesses in that state you would be wrong.
As of April 13, the amount loaned to New York businesses as a percentage of payrolls was 23 percent, well below just about every other state. States like Iowa, Kansas and Montana, which have low rates of infection, received loans for more than 60 percent of their payrolls.
New York companies have secured half as many loans as Texas companies in a state with less than 10 percent of New York’s cases.
And early reports show that the Paycheck Protection Program funds – loans that will in part be forgiven for those who maintain their payroll – are going disproportionately to manufacturers, construction firms and professional services at the expense of hospitality businesses and retailers.
Even though since March eight million restaurant employees – two-thirds of the workforce – have lost their jobs and many restaurants in Nassau County and across the country may need to shutter their doors for good.
What’s worse is where the money has been going. Spoiler alert: not to what most people would call small businesses.
At least 75 companies that received the aid were publicly traded, according to the Associated Press, and some had market values well over $100 million. The AP identified the 75 companies as recipients of a combined $300 million in low-interest, taxpayer-backed loans – out of the $349 million in the program.
A provision in the Paycheck Protection Program pushed by lobbyists allowed big chains like Ruth’s Chris Steak House, Potbelly and Shake Shack to get tens of millions of dollars while many smaller restaurants walked away with nothing.
Ruth’s Chris, a chain that has 150 locations and is valued at $250 million, reported receiving $20 million in funding from the Paycheck Protection Program.
The Potbelly chain of sandwich shops, which has more than 400 locations and a market value of $89 million, reported receiving $10 million last week.
Shake Shack, a $1.6 billion burger-and-fries chain based in New York City, received $10 million.
After complaints from small business advocates when the fund went dry, Shake Shack founder Danny Meyer and Chief Executive Randy Garutti announced Sunday evening that they would return the money.
“Late last week, when it was announced that funding for the PPP had been exhausted, businesses across the country were understandably up in arms,” the two wrote in a letter posted online. “If this act were written for small businesses, how is it possible that so many independent restaurants whose employees needed just as much help were unable to receive funding?”
Among other beneficiaries of money intended to help small businesses were McDonald’s and Burger King, which used their corporate muscle to navigate through the borrowing process.
The entire application process started badly and went downhill from there.
Customers of Bank of America and JP Morgan Chase have sued the banks in federal court, saying data provided by the Small Business Administration on the average size of the loans shows that they doled out money to large customers first.
This was made possible by defining a small business as having 500 or fewer employees.
The lawsuits say smaller customers were not given the chance to apply as quickly as larger businesses in some instances. In other cases, the banks sat on some smaller customers’ applications instead of submitting them to the SBA.
Chase said in a statement on its website Sunday that some of the disparity between the speed at which certain clients’ applications were processed compared with others had to do with which parts of Chase’s sprawling operations the clients applied to for help.
“Within each business, we did not prioritize certain clients, large or small,” it said.
For some, receiving approval was a matter of the luck of the draw.
Many local business owners said they were delayed in applying for loans because their banks had not been set up to accept the PPP applications or had internal issues with the terms of the program — after being told they had to apply to a bank with which they had a banking relationship.
The banks said they were delayed in processing applications by the number that they received.
At the same, customers of banks either more willing, more able or both got their applications processed and their loans approved.
All of this seems to have a familiar ring to it.
Elected officials love to talk about how small businesses are the backbone of the nation’s economy, the driving force behind innovation and entrepreneurship. Which is true.
But then they invariably back the big guys who can afford to hire lobbyists and make campaign contributions that help make the playing field less even for small businesses.
It is not just a matter of luck that a company like Amazon will make billions of dollars – often at the expense of small businesses – and not pay federal income taxes. Or that the $1 trillion tax cut approved by a Republican Congress would favor large corporations or the wealthy.
Or that in the stimulus plan big corporations were able to get fast, basically unlimited help from the Fed, while small businesses and individual help is limited and slowed by congressional process and dysfunction.
Now you might think that in the midst of a pandemic that has claimed more than 46,000 lives as of Wednesday and crashed the economy that things might be any different.
But it appears that will only happen if voters elect representatives who back legislation to take the money out of politics.
The Paycheck Protection Program ran out of money last Thursday, leaving many business owners wondering how they would survive.
Lawmakers, who were warned by economists in advance that the $349 billion allocated for the program was well below what was needed, have reached agreement on a deal to add $320 billion to the program plus $60 billion for the SBA’s disaster relief funds.
The terms of that deal may determine whether your favorite places to dine and shop will remain open.
