Small Business Administration Keeping Closer Tabs on Loan Forgiveness

Matt Posky
by Matt Posky
small business administration keeping closer tabs on loan forgiveness

With enhanced scrutiny and plenty of differing opinions being heaped upon the government loans issued to help soften the economic impact of the coronavirus pandemic, the Small Business Administration (SBA) has signaled plans to conduct comprehensive investigations before offering any loan forgiveness. Under normal circumstances, one would expect that to be the typical course of action for all loans. But the scope of the Paycheck Protection Program (PPP) has complicated things.

Designed to provide a direct incentive for small businesses to keep workers on the payroll, the program earned heaps of criticism after millions of dollars were allocated to groups that didn’t exactly constitute small businesses. While the list is long, standouts include the Los Angles Lakers and Ruth’s Hospitality Group. We’re more interested in the United States’ largest new-vehicle retailers, AutoNation and Penske Automotive — both of which received millions via the SBA’s Paycheck Protection Program.

Responding to criticism, AutoNation announced it would return the $77 million in loans last Thursday. It also planned to cancel all of its existing loan applications. Penske beat it to the punch by one day, doing the same while making itself look slightly better by beating updated guidance from the SBA requiring all “large businesses” to certify they have a valid need for funding through the coronavirus relief package.

While neither really fit the definition of a small business, many complained that such companies employ sizable numbers and should be given aid when needed. Of course, the counterpoint is that bigger businesses often have robust cash reserves that must be taken into account — which sounds like something the Department of the Treasury would like to see happen.

On Tuesday, Treasury Secretary Steven Mnuchin said the SBA will critically examine all PPP loans valued at more than $2 million. Bemoaning the fact that the second most-valuable NBA franchise in existence (the LA Lakers) managed to snag $4.6 million on CNBC, Mnuchin said he was glad to see them return the money — suggesting they’d otherwise be open to legal ramifications. He said the same about AutoNation.

So what happened? Well, the government started offering free money and everyone wanted some. The original $349 billion forgivable loan program exhausted its funds sooner than anyone expected; President Donald Trump has since signed a $484 billion spending package that dumps another $321 billion into the Paycheck Protection Program. However, that new round of funding isn’t expected to last more than a couple of weeks. Hopefully that sees the U.S. through the worst of the economic strain caused by the pandemic, as most of the automotive industry plans on relaunching production by mid-May.

[Image: Casimiro PT/Shutterstock]

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4 of 13 comments
  • Inside Looking Out Inside Looking Out on Apr 28, 2020

    Did GM, FIAT and Ford also apply for that loan? The Big 3 is not big anymore. I would call them rather Small 3.

  • Speedlaw Speedlaw on Apr 29, 2020

    You’ve made my day. FB has a winger friend with that video “FB censors” outrage. I follow a TTAC time waster link on PPP loans (my bank would not take any, so of interest) and I get the debunk on the winger friend’s unhappy about censorship video. The internet is now officially a circle. edit:removed a nonprofane/nonsexist/nonracial word the TTAC filter dislikes.

  • Jim Bonham Thanks.
  • Luke42 I just bought a 3-row Tesla Model Y.If Toyota made a similar vehicle, I would have bought that instead. I'm former Prius owner, and would have bought a Prius-like EV if it were available.Toyota hasn't tried to compete with the Model Y. GM made the Bolt EUV, and Ford made the Mach-E. Tesla beat them all fair and square, but Toyota didn't even try.[Shrug]
  • RHD Toyota is trying to hedge their bets, and have something for everyone. They also may be farther behind in developing electric vehicles than they care to admit. Japanese corporations sometimes come up with cutting-edge products, such as the Sony Walkman. Large corporations (and not just Japanese corporations) tend to be like GM, though - too many voices just don't get heard, to the long-term detriment of the entity.
  • Randy in rocklin The Japanese can be so smart and yet so dumb. I'm America-Japanese and they really can be dumb sometimes like their masking paranoia.
  • Bunkie The Flying Flea has a fascinating story and served, inadvertently, to broaden the understanding of aircraft design. The crash described in the article is only part of the tale.