Federal Paycheck Protection Program Proving Problematic

State Treasurer proposes redefining small businesses as those with 20 or fewer employees.

A federal program that provides much-needed assistance to small businesses struggling amid the coronavirus pandemic is a good first step but is fraught with problems, including how it defines a small business, the Wisconsin state treasurer said. 

Sarah Godlewski, elected as state treasurer in November 2018, said the federal Paycheck Protection Program has benefited many small business owners in desperate need of assistance during the pandemic. 

But too many small businesses are missing out on PPP money intended to help them remain viable during the pandemic and are losing out on that assistance, in part because the program dollars go to businesses as large as 500 employees. 

Larger companies have competitive advantages over smaller ones in obtaining PPP dollars, Godlewski said. They have greater resources and relationships with lenders to help them better access that money. 

“We need to ensure that this program is actually helping main street and not Wall Street,” Godlewski said.

To address that situation, Godlewski proposed that some PPP dollars be directed to businesses of 20 or fewer employees. Other funding could go to businesses that employ between 21 and 100, she said, “to make sure these businesses that are the heart of so many communities get the assistance they need.

State Treasurer Sarah Godlewski is proposing small businesses be redefined as those with 20 employees are less for the Paycheck Protection Program. (Photo by Julian Emerson)

PPP, part of the federal CARES Act, offers loans designed to incentivize small business owners to keep their workers on payroll. Loans are forgiven if all employees are retained for eight weeks and loan funding is used for payroll, rent, mortgage interest payments or utilities.

Congress has authorized $650 billion in PPP funding in two disbursements to help small businesses. The first wave of that money was used up quickly, prompting the need for additional assistance. As of May 23, about $138 billion in funding remained. 

PPP disbursements have prompted controversy because of revelations some of that money has gone to large corporations it was not intended for. Such well-funded, large companies as Ruth’s Chris Steak House and Shake Shack received $20 million and $10 million, respectively, in program money. Both companies reportedly later returned the money.  

Dozens of publicly traded companies received more than $500 million in PPP dollars during the initial disbursement of those funds. Godlewski said efforts by her and others to convince the U.S. Treasury Department to increase transparency and accountability to prevent additional instances of large companies receiving money intended for small ones have been ignored.

“The fact that we can’t get this information from the Treasury is certainly cause for concern,” she said. “They have said it’s just not their priority right now.”

Godlewski isn’t the only elected official upset with how PPP has been operated. Congressional Democrats have called out the lack of accountability, and earlier this month U.S. Sen. Tammy Baldwin, D-Wis., authored a letter to Treasury Secretary Steven Mnuchin and Small Business Administration Administrator Jovita Carranaza raising concerns the program excluded many farmers and other small business owners most in need of funding. 

Treasury Department officials said they have worked hard to get PPP money to businesses as quickly as possible to keep them running during the economic downtown caused by the pandemic. Enacting more regulations, including some opposed by some members of Congress, would have delayed payments, they said. 

In an acknowledgement of oversight concerns, Mnuchin and Carranza announced in an April 28 news release a review process of PPP loans of $2 million or more. 

“We remain fully committed to ensuring that America’s workers and small businesses get the resources they need to get through this challenging time,” the release states.

PPP has provided significant help to many Wisconsin small businesses, but problems navigating the program’s regulations and the inability of some to access the program have been problematic, said Kyle Whelton, vice president of the Sheboygan County Chamber of Commerce.

Some business owners have struggled to access the program, Whelton said, and many who have received funding are concerned changes to the way that money can be spent could turn their grant into a loan they can’t afford to pay back. 

“Having this money is a relief,” he said. “But there is definitely a lot of anxiety in getting it.”

Rob Grover is feeling the effects of the pandemic as both a small business owner and as the Trempealeau County economic development and tourism coordinator. Grover, who co-owns Winghaven Pizza Farm in rural Galesville, said many small business owners where he lives have expressed frustration at not receiving PPP money sooner, or in many cases, at all. 

“Out here in rural Wisconsin, we’re struggling,” Grover said. “We see these giant corporations who were able to get this funding when a lot of small businesses who really need that money can’t. A lot of people in the rural areas feel like they’ve been left out.”

Many small business owners have contacted her expressing difficulties accessing PPP money, Godlewski said. As another round of PPP funding is nearly spent and many Wisconsin business owners report not receiving program money, she said her frustration with the administration of the program continues. 

“We need disclosure because it prevents fraud and misspending,” Godlewski said. “The question remains, are these businesses using the money as it was intended? Taxpayers deserve that kind of accountability.”