To say that the programs that were rolled out by the Federal Government and the SBA were a mess is an understatement. While the intention of the $349b Stimulus Program though the forgivable Paycheck Protection Plan (PPP) and the existing Economic Injury Disaster Loan (EIDL) were right, the implementation to get money in the hands of the small business owners in this economic shutdown was, well a disaster.

Think about it. When you get banks between a small business and their money, what could go wrong? ☹

This was the first mistake by the SBA. The PPP program as passed by the Congress was self certifying and banks had no liability for the loans since they were fully guaranteed by the Federal Government. But banks got nervous that since they were holding the loans (or selling them after 7 days), they would somehow be held liable.

On top of this, the specific rules  and requirements have become every changing on what qualified for “2.5X payroll” as the basis for the loan and in EIDL’s case, what the maximum loan was (now $25K). To further complicated things, there has been confusion on whether independent contractors are included in the payroll calculation and how sole proprietors can apply for the PPP beginning April 10.

Banks were ill prepared for this rollout both with their own internal systems and manually entering small business information into the SBA required systems. Fintech companies like Kabbage. Lendio and PayPal are in a better position to process loans but they had been delayed in getting SBA approval until now.

In this economy sinking into a Depression, time is not on the small business owner’s side.

Money needs to be put into their bank accounts immediately so they can continue to employ their staff and serve customers. Life savings are being lost daily. Getting several hundred thousand dollars to them right now would start to save this economy.

Here is what the Federal Government should do:

  1. Stop the processing of loans through banks. Their natural inclination issue to reduce their risk – something that we can’t worry about now. Yes, there will be fraud in this program if money is provided directly to small businesses but 98% will be used correctly. The government can prosecute the other 2% later.
  2. Get Fintech companies more involved. (Kabbage, PayPal. Lendio, FundBox). The analysis engines these companies have developed in order to give loans is exactly what the SBA needs to use now to quickly get money to small business owners now. Using their systems, approval could happen the same day and money could flow the next day.
  3. Send out checks automatically to small businesses based on 2019 tax filings. This would be similar to how the $1200 checks to every American is supposed to work. Based on the companies 2109 net profit, every small business gets a check to support their ongoing operation. This gets automatically deposited in their account or sent to the business address after confirmation by the owner.
  4. Pay each small business employee (and independent contractor) 75% of their salary up to $75K. This would allow the small business to remain open with their staff and build toward recovery. Again, this can be based on their 2019 W2 or 1099. This would also allow employees to pay most of their food and rent bills which would be good for the economy.

The time is now to help the backbone of our economy, small business. Delay makes any recovery longer.