It took businesses hit by coronavirus less than two weeks to drain the $349-billion Paycheck Protection Program. Those loans were supposed to go to small businesses and non-profits that couldn’t afford to keep their staff at work amidst the coronavirus recession:
University of Chicago Booth School of Business accounting professor Michael Minnis has co-authored a preliminary study on the Paycheck Protection Program and set up a website tracking the program and its loans. He sees few links between where the biggest economic need is during the COVID-19 crisis and where the government funds are going.
Instead, Minnis said, PPP loans appear to be going to the eligible firms most able to retain their workforces, even before receiving assistance. “The irony of the program is that if your businesses was still operating and had a large payroll you got more money,” Minnis said. “The worst-hit firms had already laid off some or all of their people by the time the program got started, so they may not have gone for it” [Stephen Gandel, “Paycheck Protection Program Billions Went to Large Companies and Missed Virus Hotspots,” CBS News, 2020.04.17].
South Dakota’s small business coronavirus loans aren’t flying off the shelf quite as fast, but applications to the Governor’s Office of Economic Development for Small Business Economic Disaster Relief loans are on pace to exhaust that new $11-million fund by mid-May:
The first loans were approved April 10, when most of state government was on Good Friday administrative leave, according to Mary Lehecka Nelson. She is GOED’s deputy commissioner.
Through the close of business Wednesday, the office had received 205 applications, Lehecka Nelson said, and as of Thursday morning, 64 loans had been approved totaling nearly $3.5 million [Bob Mercer, “Going, Going, Gone: S.D. Relief-Loan Fund Likely to Be Out of Money Before June Special Session,” KELO-TV, 2020.04.17].
GOED caps these loans at $75,000, and they are available only to businesses with fewer than 250 employees. The loans come with these conditions:
- Proceeds from the loan must be held in a separate bank account at a bank in South Dakota.
- Applicant must provide regular expenditure reports to GOED documenting that the use of proceeds were used for normal recurring operating expenses.
- Any funds remaining in the account after 3 month period will be paid back to GOED.
- Proceeds may not be used for any distributions or dividends to owners [GOED, “Covid-19,” retrieved 2020.04.20].
GOED says the Board of Economic Development will get “a public monthly report” on loan activity. Per Senate Bill 192, that report will tell us the name of each borrower and the amount of each loan.