Of the 701 Arizona hotels that received PPP money, less than 10% of them took over half of the money.
The Paycheck Protection Program (PPP) created under former President Donald Trump’s administration was supposed to help keep workers employed while businesses faced coronavirus-induced layoffs.
But many workers failed to see any benefit as some larger companies chose to pay back the loan, rather than spending 60% on payroll to qualify for loan forgiveness.
“The Paycheck Protection Program has really failed,” Jordan Fein, research analyst with the hospitality union Unite Here, told The Copper Courier. “It’s been ‘Paycheck Protection Program’ in name only because it just has gigantic loopholes.”
Of the two dozen Unite Here-represented Southwestern hotels that received PPP loans, the union found that 10 employed less than a quarter of the workers they had before the pandemic from May through October.
“Ten of those 24 properties, based on the number of workers that we know were working, couldn’t have possibly spent the amount of money they were supposed to on payroll,” Fein said.
When businesses don’t meet the requirements for loan forgiveness and must pay it back, they are still given a break with a low interest rate.
“Companies don’t have to spend any of the money at all on payroll as long as they’re OK with just getting a 1% loan, extremely low-rate loan in an environment where it’s hard to find financing,” Fein said.
President Joe Biden, who has criticized the program’s setup, has pledged to rework it to be more in favor of small businesses.
Score for Big Companies
Besides the stipulation allowing companies to spend money however they want as long as they pay the loan back, another loophole let large chains rack up funds.
Hotels with more than 500 employees, which would have originally been excluded from the aid, pushed through an exemption allowing them to apply for each separate location they own.
As a result, companies like Columbia Sussex—which owns Mariott, Hyatt, Hilton, Doubletree, and more—received tens of millions of dollars for at least 17 of its separate sites.
According to Fein’s analysis of the Small Business Administration’s latest data, a total of 701 hotels in Arizona received PPP loans. But 53% of the money went to just 8% of the applicants.
“This is supposed to be a program that’s supposed to help small businesses, but in the hotel industry, the big borrowers are getting the majority of the money,” Fein said. “This claim that this is really for small, mom-and-pop owners just isn’t borne out by the numbers.”
New Administration Brings Changes
Biden has criticized his predecessor’s handling of the PPP.
“Trump has also failed to lay out a plan for the reforms PPP desperately needs,” Biden’s campaign website states. “Merely reinstating the deeply flawed program is woefully insufficient — PPP must be improved and revamped as part of a broader relief package to ensure small businesses that have experienced significant losses finally get the help they need.”
While the details are not yet clear, Biden has pledged to overhaul the program and guarantee that every eligible business under 50 employees receives aid. He has also suggested approving grants rather than loans for these small businesses.
But Biden also wants to see more money go straight to workers, which Fein says is more helpful than channeling them money through their employers.
“From our perspective, our members and workers would be much better off just having direct money given to them instead of, supposedly, filtered through companies,” Fein said.
Biden has proposed sending out a third round of stimulus checks with the highest amount yet at $1,400 each. Congress approved $1,200 stimulus checks in March 2020, and another $600 last month.
Biden has also proposed extending pandemic-related unemployment programs and boosting unemployment payments by $400 weekly through September, measures that will help workers who weren’t fortunate enough to benefit from PPP loans.
Congress had approved $600 weekly boosts for several months in 2020. Trump enacted a $300 additional payment for six weeks in the fall, and Congress put the $300 boost back in place last month. During the gaps, Arizonans have only been receiving a maximum of $240 per week, the second-lowest in the US.
“Folks are really struggling, particularly when the federal additional $600 ran out,” Fein said. “To folks this is completely unfair that these wealthy companies are getting so much taxpayer assistance while workers are struggling.”