Why Small Business Loans Are Not Reaching Intended Recipients – Mish Talk

The New York Times has an interesting article Denied, deferred and ignored: 13 requests and no appeal.

The article discusses the fate of Graceann Dorse and her husband, Christopher Webb, who founded a film and special effects company, FX WRX, in New York City.

“The work we do has to be done in person, with a great team,” said Dorse. They are therefore closed without income.

Three-four of the loans to small businesses were from small businesses, but they only represent 17% of loans.

“You can see there’s a real bias in there,” said John Pitts, former deputy deputy director of intergovernmental affairs at the Consumer Financial Protection Bureau.

What we’ve heard universally is that most people couldn’t get a loan under $ 50,000.“said Pitts.” Banks just weren’t designed to make such small loans. “

Too small, too different to disturb

Dorse applied to 13 different locations, all of which were rejected. The couple were the company’s only full-time employee.

The program was supposed to benefit the self-employed, but it didn’t.

Lack of regular salary

The lack of a regular salary was the second red flag. They did not pay themselves a regular salary. Like many small business owners, they took the company’s distributions and put capital back into the business.

Again, it wasn’t meant to matter, but it does.

350 billion dollars used

The first $ 350 billion Small Business program ran out last Thursday.

Thousands of applications are in the queue.

New $ 320 billion program

There is a new $ 484 billion program on the bridge, of which $ 320 billion is for small business loans. Of that amount, $ 60 billion is intended to help small businesses that have not established relationships with the big banks.

Good luck getting it.


I have a friend who is trying to get a loan. He’s in a similar situation to Dorse.

Its relationship is with Fifth-Third Bank. Fifth-Third informed him that there were already 33,000 applications in the queue in front of him.

Who got the loans?

Business Insider reported Trump’s restaurant stimulus relies on fast food, as independent restaurants struggle to survive.

President Trump – a recognized fast food fan – is creating an economic stimulus package that puts the country’s chains at the forefront. The board is made up of men who have founded or led organizations including:

  • 1 regional channel (Ray Washburne, CEO of Mr. Crowd Restaurant, who was the vice chairman of the Trump Victory Committee and a donate thousands of dollars to Trump and the Republican Party)
  • 5 fast food chains (McDonald’s, Chick-fil-A, Taco Bell and parent company of KFC, Yum Brands, Wendy’s, parent company of Arby’s and Sonic, Inspire Brands)
  • 7 other channels (CEO of parent company Olive Garden, Darden, Subway, Bloomin ‘Brands, parent company of Outback Steakhouse, Papa John’s, Waffle House and Starbucks, as well as founder of Jimmy John’s)
  • 3 giants of packaged food and drinks (Coca-Cola, PepsiCo, Kraft)
  • 3 industrial groups (National Association of Restaurateurs, National Association of Wholesalers-Distributors, International Franchise Association)
  • 4 gastronomic empires (Wolfgang Puck, Thomas Keller, Jean-Georges Vongerichten and Daniel Boulud)

These groups are not exactly what people think of as “small businesses”.

Shame on repaying loans

Shake Shack got $ 10 million from the program, but has since been ashamed of returning the money.

The chain of quick salads Sweetgreen, which was approved for $ 10 million, did the same. Sweetgreen is not a public company but has been valued at over $ 1 billion by Wall Street investors. He canceled the loan.

Kura Sushi USA is worth $ 88 million and is the US subsidiary of a Japan-based conglomerate with more than 400 restaurants. The rules of the Cares Act allowed him to apply for a loan. He got $ 5.8 million, canceled yesterday.

First come, first served

The larger the business, the faster the application and approval.

From the bank’s point of view, this makes sense.

If you were a bank, would you prefer to make 1 loan for $ 10 million or 500 loans for $ 20,000?

What happened Synopsis

  • Escapees from Congress on purpose
  • Non-small businesses were on the front line, and for big loans
  • The money ran out quickly

But the queues are still huge.

Banks always have a preference for larger loans.

What’s going to happen?

  1. A repeat of the first program minus places like the Shake Shack.
  2. The money will be used up because the queues are already overcrowded.

Because Dorse was mentioned by The Times, I bet a big bank looking for positive publicity will sign up and give them a loan.

But good luck to my friend at the end of a queue of 33,000 people at Fifth-Third Bank and others in similar shoes.

Better description of what happened and what will happen.

It’s the government and the Fed, stupid! What are you waiting for?

Economically, what’s the next step in general?

On March 23, I wrote Nothing is working now: what’s next for America?

I noted 20 “And after?” things.

Covid-19 recession will be deeper than the great financial crisis

On April 1, I commented, on Covid-19 recession will be deeper than the great financial crisis. Don’t expect a V recovery.

Forever changed

  • More conference calls and fewer business lunches
  • Fewer air travel, hotels and car rentals on a personal and business level
  • No more work at home
  • No more do-it-yourself haircuts, nails, lawns, etc.
  • Less car purchases
  • Less home purchases
  • Accelerated online shopping and more mall closures

The blow to the impacts of all of this means more bankruptcies and fewer jobs.

To note: In case you missed the announcement, I’m now on TheStreet.com/Mishtalk

The redirect is automatic and there will be no lost articles or lost comments on the articles. My “room” on TheStreet will remain free.


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