New data shows how small-business loans went to large firms, too – Press Herald

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The federal program intended to save jobs at small businesses during the pandemic supported at least 250,000 workers in Maine but nearly a third of the funding went to large companies that received loans of $1 million or more.

An analysis by the Portland Press Herald/Maine Sunday Telegram found a mere 1 percent of Maine employers that received Paycheck Protection Program loans – about 320 companies – got 31 percent of the entire funding delivered to the state, about $693 million. Those companies included law firms, hospitals, construction companies, health care providers as well as large restaurant and lodging employers.

The review found that while about 90 percent of loans were $150,000 or less – given to small, Main Street businesses – the actual payouts only accounted for 33 percent of the total funding  – $737 million. In total, Maine employers received $2.2 billion from the program this spring and summer.

These new details about the $525 billion program were released last week by the Small Business Administration under a federal judge’s order.  The SBA fought to keep the data secret, citing borrower privacy concerns, but a freedom of information lawsuit by news organizations forced the disclosure. New details about the massive bailout program emerged as lawmakers consider another round of loans to save business on the brink of failure and avoid massive layoffs.

Business Loan Amount Address City Job Count Lender
Business Loan Amount Address City Job Count Lender

The program was created in March, as the U.S. seemed on the precipice of economic collapse as governments passed stay-at-home orders, businesses shuttered and layoffs soared.

Paycheck protection was intended to save jobs and stabilize the economy by giving loans to employers that would be fully or partially forgiven if they spent the money to keep people on staff and cover essential costs.

It is credited with supporting more than 250,000 jobs in Maine, half of all workers in private industry, according to state labor data. Over 28,000 companies received loans in the state, more than half of all private employers.

Small Maine employers and workers still struggling now received less from the program than larger companies. Health care, legal, administrative, construction and other companies that received large loans quickly bounced back and seem better positioned to conduct relatively normal business without risking steep revenue losses and layoffs.

The hospitality and entertainment industry in Maine had the largest share of job losses over the spring and has not fully recovered. With tourism season long past, a worsening pandemic and winter approaching, many worry heavy layoffs and business closures lie ahead without additional federal aid.

The structure of the Paycheck Protection Program helps explain the disparity of funding to large, now mostly stable employers and those on the brink of failure.

The program provided a forgivable loan of up to $10 million to companies and nonprofits with up to 500 employees. The loan amount was based on companies’ payroll, with a $100,000 cap on individual salaries. Therefore, larger employers inevitably received bigger loans than small companies.

The inspector general for the SBA in October said there were “strong indicators of widespread potential abuse and fraud in the PPP.”  There have been no reports of fraud or abuse in Maine.

At the same time, many prominent companies Mainers would not consider “small businesses” received large loans for the program. The overwhelming majority of the 50,000 private companies in Maine have fewer than 50 employees. In 2018 just 640 of companies in the state – about 1 percent of total private employers – had more than 100 workers, according to Maine Department of Labor statistics.

Some of the larger recipients included:

– Berry Dunn McNeil and Parker, a Portland accounting firm with 500 employees, received an $8.1 million loan.

– Saturn Associates Inc., a Falmouth-based Dunkin’ Donuts franchise owner reporting 500 employees, received $7.6 million.

– Woodland Pulp in Baileyville, one of Maine’s largest paper mills, was loaned $6.6 million.

– Lee Holding Co., the parent company of Lee Auto Malls, one of the state’s largest car dealers, received $5.5 million.

– Hussey Seating Co., a North Berwick manufacturer, got a $4.7 million loan.

– Mount Desert Island Hospital, with 420 employees, got $6.9 million.

Large borrowers said the money was critical to ride out an unprecedented downturn.

InterMed, a physician-owned health care company with offices in Portland, was the only Maine employer to receive a $10 million loan. The company reported employing 500 people.

“Without it, it is likely that our organization would not have survived; we could not have made up for all the revenue that was lost,” said spokesman John Lamb.

In-person medical services, including physical therapy, imaging and surgery, were suspended during a statewide lockdown in April. Company owners stopped taking a salary and it would have exhausted its cash reserves and bank credit within weeks, Lamb said.

The loan “allowed us to keep going; it gave us the ability and the confidence to ramp up when the time was appropriate,” he said.

Eight months later, InterMed has hired back most of the employees it let go before the loan. Procedures have been updated to see patients safely, including a telemedicine expansion to keep in touch with clients nervous about venturing into public. There are no plans to furlough any employees, Lamb said.

Lamb isn’t willing to rule out the possibility of future financial support, but the company is in a better position now, even though in Maine the number of new cases, hospitalizations and deaths from COVID-19 is now far higher than in the spring.

“We’re feeling good about where we are in terms of preparing for any wave that may come, but it is certainly difficult to predict what lies ahead,” Lamb said.

Pierce Atwood, a Portland-based law firm with offices in Boston, Providence, Rhode Island, and Washington D.C., got a $5.6 million paycheck protection loan to cover more than 200 attorneys and staff.

“We were able to completely avoid layoffs or furloughing any of our employees; that was our highest priority,” said Managing Partner David Barry.

A mass layoff was a significant concern for the firm, Barry added. In the terrifying early days of the pandemic crisis, there was no sense of how severe the economic fallout would be.

“There were no good or sound economic forecasting tools available to help businesses predict what the impact was going to be,” Barry said. “Many of our clients’ businesses were very, very seriously impacted by the pandemic and as a result so was ours.”

News organizations were among those whose operations have been threatened by the pandemic. The Portland Press Herald and other newspapers owned by entrepreneur Reade Brower in Maine received $3.8 million to protect workers at the various publications. Press Herald Publisher Lisa DeSisto said the loans enabled the newspaper to continue operating while advertising revenue declined. Bangor Publishing Co., which owns the Bangor Daily News, received $1.6 million.

At Pierce Atwood, the firm’s situation stabilized over the course of 2020, but it is possible the firm could need more assistance, Barry said.

“We are grateful for the funding we received in the early months when things were most difficult and extreme. I’d like to think that with the improved economic conditions we would not have the need for further federal loan program participation, but without knowing exactly the seriousness of the economic impact, I can’t say that with certainty,” Barry said.

The Paycheck Protection Program is criticized for allowing major financial institutions to prioritize wealthy clients, including chain restaurants, to secure huge loans ahead of locally owned small businesses, especially those owned by women and people of color.

The first $349 billion available from the program in early April was handed out in less than two weeks. Another $320 billion was added in mid-April. More than $130 billion was unspent when it ended in July, according to the Small Business Administration. The Treasury Department later tightened rules to make sure well-capitalized companies did not access funding meant for small employers.

A Washington Post analysis of the new loan data found that more than half the money went to just 5 percent of loan recipients and 600 large companies, including national chains, received the maximum loan amount. Maine’s strong community banking network is credited with directing loans to very small and medium employers at a higher rate than other parts of the country. Maine ranked seventh in the nation for loans per capita, according to one analysis.

Since the program ended, there has been no federal relief for employers and workers battered by the economic conditions created by the pandemic. A bipartisan group of lawmakers, including Maine Sens. Susan Collins and Angus King, proposed a $900 billion aid package last week that includes more than $228 billion in new paycheck loans.

Collins, who was an architect of the initial program along with Florida Sen. Marco Rubio, in October proposed another round of funding that would place new limits on who could receive loans.

Under that plan, new loans would be available to the hardest-hit businesses with 300 or fewer employees and a 35 percent revenue decline. It would also expand eligible spending to include investments and equipment to operate safely and simplify loan forgiveness for employers borrowing $150,00o or less.

The recent aid package is still being negotiated, but it will likely include those provisions, said a spokeswoman for Collins.

“The details of the compromise package are still being negotiated, but we expect the same guardrails to be included,” said Communications Director Annie Clark.

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