WASHINGTON—A round-up of some of the latest news related to the Paycheck Protection Program.
New data from the Small Business Administration (SBA) on its paycheck protection program (PPP) revealed roughly $7 billion more was disbursed through the program over the last week, but more than $100 billion in funds remains available.
The latter is something of a surprise to many analysts, who had predicted the second round of funding made available by Congress would go even faster than the $349 billion has been disbursed in round one. Of the $310 billion available through the PPP's Round 2 funding, approximately $195 billion has now been loaned out.
The average loan size of Round 2 also continued to decrease, now standing at $70,622. The average loan size from Round 1 of funding was $206,000. The new data also showed that lenders with more than $50 billion in assets had approved the most loans (almost 1.3 million loans), followed closely by lenders with less than $10 billion in assets (almost 1.1 million loans).
NAFCU reported its new Economic & CU Monitor report revealed a majority of respondents experienced issues accessing the PPP website, affecting their ability to get loans processed after the program launched. For respondents that are originating PPP loans, almost 80% of their loans had gone to businesses with fewer than 10 employees.
Magic Johnson Creates Fund
Separately, saying minority-owned businesses are being overlooked in the COVID-19 relief efforts, Magic Johnson said his EquiTrust Life Insurance Co. will provide $100 million in capital to fund loans through the Small Business Administration’s Paycheck Protection Program.
EquiTrust, which is majority owned by Magic Johnson Enterprises, will partner with MBE Capital Partners, a Fort Lee, N.J., based nonbank lender that specializes in financing minority- and women-owned companies, to offer Paycheck Protection Program loans.
“What we’re launching here now is so important because we’re going to save a lot of small, minority businesses because they can’t just walk into the bank and get that loan,” Johnson told the Wall Street Journal.
Rafael Martinez, chief executive at MBE Capital, told the Journal he has also been hearing complaints from clients who couldn’t get in on the first $350 billion round of funding.
Johnson said large and well-funded companies receiving the money—including his former employer, the Los Angeles Lakers, highlighted the problem that smaller companies with limited financing options faced in competing for the loans.
Initial Group of 5,000 Loans
The companies said they have reached an agreement on how the arrangement will work after being connected through the National Action Network, the civil rights organization founded by the Rev. Al Sharpton.
Johnson told the Journal the $100 million investment will immediately be put toward funding the roughly 5,000 Paycheck Protection Program loans MBE Capital has had approved by the Small Business Administration so far, according to Martinez.
He said of MBE Capital’s approved PPP loans, about 80% have been for minority-owned businesses, which have requested an average of $25,000, reflecting the small size of the firms, the Journal added.
Foreign-Owned Companies Get PPP Funds
Meanwhile, details around which companies have received funds from the Paycheck Protection Program and which have not continue to be uncovered. One new report has found some foreign-owned businesses scored millions in PPP loans, while other business-owners were unable to secure funds.
One example, according to ABC News: Cinedigm, an entertainment company based in Los Angeles, that is publicly-traded company and which had more than $50 million in revenue in 2019. Cinedigm is majority-owned by a Chinese private equity firm, and has also accessed millions of dollars through loans from its parent company.
Cinedigm received potentially forgivable PPP loan of $2,151,800.
ABC News said the company did not respond to its request for comment, but said in its filing that it "intends to use all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments to support business continuity throughout the COVID-19 pandemic."
ABC News said the funds that have gone to companies such as Cinedigm raise a question: Do foreign-owned entities qualify for PPP loans?
“Business owners and experts say a lack of guidance on the matter has led to uncertainty among applicants and lenders -- shutting out some small businesses owned by immigrants that may qualify, while allowing other foreign-owned companies to cash in,” the report stating, adding there is “no clear answer” to the question.
A ‘Green Light’
Matthew Moriarty, a partner with Koprince Lawl, which is focused on government contract litigation, told ABC News that changes to the PPP rules provided a “green light” for foreign-owned businesses.
"Generally speaking, the rule in America is: If the law doesn't say that you can't, then you can. I don't see anywhere where it says, 'You have a foreign owner, you're out,'" he said.
But Moriarty also noted considerable confusion remains over the question, and many small businesses have reported they were rejected or told not to apply by their bank because of their foreign ownership, even though they appear to satisfy the other requirements for the program.
Due to a lack of requirements around full disclosure in the PPP program, ABC News noted that for the time being there's no way to determine the extent to which large, foreign-backed enterprises may be benefiting from PPP funds.
"Without disclosure by the Treasury or the SBA of PPP loans to foreign-owned entities, the American taxpayer is left to wonder how much of their hard earned dollars are supporting foreign companies," one analyst said.