KINGSTON, N.Y.–The CEO of one credit union here has authored an opinion piece in local publications arguing the Paycheck Protection Program isn’t helping the small businesses it’s designed to assist.
In a letter written prior to the passage of legislation allocating $480 billion in additional relief, including funds for the PPP, Wayne Winkler, president and CEO of Mid-Hudson Valley FCU said his CU joined many local lenders in welcoming the announcement from the Small Business Administration of the PPP.
But the reality hasn’t met the promise, Winkler wrote.
“The SBA touted their PPP as ‘a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.’ The program allowed for businesses with up to 500 employees to apply for assistance; the program language, however, specified that businesses with franchises need only employ less than 500 individuals per location,” said Winkler. “This language permitted large, multi-billion-dollar business to apply for and secure funding intended for smaller businesses with limited access to additional capital.”
Begging the Question
Winkler said many national banks were able to “capitalize” on the guidance to leverage relationships with larger business clients to secure funding in greater amounts, and to prioritize larger loan amounts in order to maximize fee revenue.
“According to the SBA, the average application amount of $150,000 or less made up a whopping 74% of approvals. Yet, only 17% of loans funded fell into the $150,000 or less category,” wrote Winkler. “This means that an overwhelming 83% of the funded loans were for amounts over $150,000. Naturally this begs the question: if the vast majority of small businesses were requesting relatively nominal amounts, why were the smaller percentage of larger loan amounts funded – essentially leaving the small businesses the program purported to help without the aid they so desperately need? Unfortunately, the answer lies in the fact that larger lenders with more resources were able to claim disproportionately large amounts of the funding.”
A ‘Fierce Advocate’
Winkler said his credit union remains a “fierce advocate for a more equitable disbursement of PPP funds,” and cited his own CU’s experience with the PPP, where the average loan amount for its members has been $42,000 – far below the SBA’s average disbursement of $206,000 per loan.
Watch CUToday.info’s The ’Tude, where Winkler’s full letter will soon appear.