Dave Howell opened a can of worms with his post about the Paycheck Protection Program. I had heard about this program on the news, but did not realize how much money they were talking about, or who it would be going to, or how.
Dave sent me the spread sheet with all the names, amounts, and lenders, and wow, that was interesting. You can see the spreadsheet – the link is here at Dave’s blog, Chico Taxes.
The first line on the spreadsheet is “$5 – $10 million” for Sierra Nevada Brewery restaurant. And here’s the stinker – Sierra Nevada founder Ken Grossman is taking it through Golden Valley Bank, a bank he co-founded here in Chico.
Grossman’s bank is lending millions out to local businesses. “How nice!” you say? I don’t think so. I found this article from Business Insider.
https://www.businessinsider.com/banks-could-pick-up-24-billion-ppp-processing-fees-2020-7
July 9 – “More than 4,000 lending institutions that process loans through the Paycheck Protection Program (PPP) are in position to split between $14.3 billion and $24.6 billion in processing fees for those loans, per analysis of SBA data cited by The Wall Street Journal. That includes a total of between $1.5 billion and $2.6 billion that the two largest US banks and the program’s biggest lenders, JPMorgan Chase and Bank of America (BofA), are set to split.”
Wow, Der Beer Man is going to make out like a bandit – doubling ending the system, getting free money, and fees to dole it out!
“The fees banks earn for disbursing PPP loans depend on the size of each loan: 5% for loans below $350,000, 3% for loans between $350,000 and $2 million, and 1% for loans above $2 million. On top of those processing fees, banks that disbursed PPP loans will also earn 1% in interest on PPP loans that aren’t forgiven.”
For example, $15,000 for a $1.5 million loan. Financed and secured with taxpayer money. The Wall Street Journal claim some businesses “will use the net proceeds of fees … to support small businesses and the communities and nonprofits we serve,” but that is not required.
Apparently the feds are trying to encourage banks of all sizes to get in on the party. According to Abrigo, “Lenders that are not already SBA 7(a) lenders, the rule said, ‘will be automatically qualified…'”
http://www.abrigo.com/blog/2020/03/28/how-lenders-prepare-for-sba-7a-paycheck–protection/#
“The SBA Paycheck Protection Plan provides loans of up to $10 million that are 100% guaranteed by the SBA in order to encourage employers to retain employees or bring laid off workers back on the payroll. They are unsecured loans due in 2 years with a fixed interest rate of 1% (initially, the SBA and Treasury said they would be 0.5%, but raised the rates on April 2). They require no collateral or personal guarantees, and no upfront borrower fee payable to the SBA. Another major difference from the regular 7(a) program is that borrowers don’t have to show that they cannot obtain credit elsewhere.”
Wow, I don’t know about you, but this whole thing reminds me of the mortgage banking feeding frenzy of the early 2000’s – no collateral, no personal guarantees, and no upfront borrower fee?
As you may know, it’s a lot easier to dole out money that’s not yours. Especially when you are doling some of it out to yourself.
Chico Taxpayers Association 