U.S. small business program handed out virus aid to many borrowers twice - CNBC

U.S. small business program handed out virus aid to many borrowers twice - CNBC


U.S. small business program handed out virus aid to many borrowers twice - CNBC

Posted: 02 Jun 2020 06:34 AM PDT

U.S. President Donald Trump departs after speaking about the Paycheck Protection Program (PPP) loans for small businesses adversely affected by the coronavirus disease (COVID-19) outbreak, following an event in the East Room at the White House in Washington, April 28, 2020.

Carlos Barria | Reuters

A technical snafu in a U.S. government system caused many small businesses to receive loans twice or more under a federal aid program to help businesses hurt by the Covid-19 pandemic, nearly a dozen people with knowledge of the matter said.

The money mistakenly handed out could amount to hundreds of millions of dollars that the government and lenders — which made the loans — have been trying to identify and recover in recent weeks, one of the people briefed on the matter said.

The technical issue and scale of the resulting duplicate deposits made under the Small Business Administration's $660 billion Paycheck Protection Program (PPP) have not been previously reported. They are the latest issue to emerge with the massive program, which was designed to keep businesses hurt by the novel coronavirus afloat and their workers employed.

The error was caused by a blind spot in the SBA's loan processing system which failed to see when some borrowers submitted applications multiple times typically with several different lenders, three of the sources said.

Information provided by the sources, which include industry executives and borrowers, as well as Reddit posts, suggest at least 1,020 duplicate deposits were issued. While that is a tiny fraction of funds disbursed under the huge program, it could amount to roughly $116 million dollars based on average loan sizes.

A spokesman for the SBA declined to comment, while a spokesman for the Treasury, which jointly administers the program, did not respond to a request for comment. Launched in April, the PPP allows small businesses hurt by the pandemic to apply with a bank for a forgivable government-backed loan. The SBA has approved roughly 4.48 million loans averaging $114,000 in size for a total of $510 billion as of May 30.

Under the program, lenders issue the loan and are later reimbursed by the SBA. The government has said it will only guarantee one loan per borrower, which means lenders, rather than the taxpayer, are likely to be on the hook for the error.

Wells Fargo, JPMorgan Chase, Bank of America, PayPal, Kabbage, Square and BlueVine are among companies that have deposited duplicate loans, according to the sources and Reddit posts.

"The SBA inadvertently issued duplicate loan approvals to some small businesses. It is our impression that the majority of these borrowers are...honest small business owners who had applied for a PPP loan through multiple lenders," a spokeswoman for BlueVine said in an email, adding "multiple" lenders were affected.

A spokeswoman for JPMorgan Chase said the bank was aware of a "handful" of duplicate deposits and had referred those customers to the SBA. A spokeswoman for Square confirmed it was working with the SBA and borrowers to resolve the issue.

Spokesmen for Wells Fargo and Bank of America declined to comment. A spokesman for Kabbage did respond to requests for comment.

"We have seen a small number of duplicate applications funded through the SBA Paycheck Protection Program, despite the administration's guidance that applicants not apply more than once for a loan," said a spokesman for PayPal, which partnered with a bank to fund the loans. He added PayPal was working with the SBA and borrowers to resolve the issue.

Cash scramble

The PPP was launched hurriedly on April 3 as the government rushed to get cash to millions of desperate borrowers. From the outset, the unprecedented first-come-first-served program struggled with technology and paperwork problems that led some businesses to miss out while some affluent firms got funds.

In the scramble for cash, many businesses applied with multiple lenders. Industry sources estimated that roughly 15-20% of the applications received by the biggest banks were duplicates.

Most of those were spotted and withdrawn, but a fraction appeared to slip through if a borrower's Social Security Number and tax identification code were mixed up in the system, one of the people said. Another source briefed on the issue said the SBA estimated that the universe of duplicate approvals amounted to hundreds of millions of dollars if not more.

"The SBA has asked lenders to review duplicate loans based on a list they provided and work with any other lenders that may have extended funds to get one of the parties to cancel," the BlueVine spokeswoman said.

The SBA has said in the past that it doesn't collect disbursal data from lenders, so the agency may not know the total amount of duplicate deposits. And lenders may not know if they have issued a duplicate deposit unless the borrower tells them, three of the people said.

"How is it that I was successful at getting money from two different banks?" asked one California-based business owner who said she received two deposits, one of which was processed by Wells Fargo. She told Reuters that she returned the other loan.

Businesses that refuse to return loans could be referred to the Department of Justice, which is probing suspected PPP fraud.

Some borrowers said they weren't clear on how to fix the issue. One Reddit user who last month said they received duplicate deposits from JPMorgan Chase and PayPal said they had a "deep fear" that if they reported the problem they may be left "with no PPP at all."

Business booming at small meat plants, but some producers are in trouble - Capital Press

Posted: 02 Jun 2020 03:45 PM PDT

EUGENE, Ore. — At Mohawk Valley Meats, a small USDA slaughterhouse here, workers in  blood-splattered white smocks raced to package meats last Friday.

Business is booming for small meat processors across the U.S. because of soaring demand for locally raised and processed meat and a glut of slaughter-ready livestock created when big slaughterhouses became hotspots for coronavirus outbreaks and had to shut down.

"I've never seen anything like this. In two days, we booked all of 2020. We have kill dates for September of 2021 for pigs that haven't even been conceived yet," said Denise Pohrman, the plant manager.

Many small processors say they are "thriving." But some plant managers, including Pohrman of the Mohawk plant, say despite their gratefulness for increased business, they are concerned that their smaller-scale, already-existing customers have been swept aside by larger producers.

With some bigger slaughterhouses closed or slowing their production because of COVID-19 problems, many ranchers have turned to smaller processors. Rebecca Thistlethwaite, director of the Niche Meat Processor Assistance Network, said even ranchers from the Midwest have sent truckloads of hogs to Oregon slaughterhouses.

Faced with new customers, processors told the Capital Press they have had to make tough decisions.

Some processors have dropped small-scale producers and accepted new, larger-scale customers — to make extra income, prevent wasteful livestock deaths and satisfy the nation's demand for meat.

Other processors have remained loyal to their small producers, hoping to maintain long-term customers and keep them afloat.

"I don't know who is right and who is wrong, but we have created victims in the aftermath," said Pohrman of Mohawk Valley Meats.

Pohrman said she packed her calendar with new customers when calls flooded in and now regrets it because 20 to 40 regular customers call daily begging her to harvest their livestock. She said she will no longer accept new customers.

Many small-scale producers, she said, have already paid for slots at farmers markets for the year but will run out of meat before their next butcher dates.

Deck Family Farm in Junction City, Ore., which produces pasture-raised pork, lamb, beef and chicken, has worked with Mohawk Valley Meats 15 years but had its slaughter schedule "totally disrupted," according to the farm's poultry manager.

"I lay awake at night and don't sleep," said Pohrman. "I've apologized more than 10 times this week for allowing myself to become overbooked."

Pohrman said her new customers, who are reacting to the crisis, are likely just temporary, while her existing customers will likely be with her long-term.

Bill Hoyt, a cattle rancher near Cottage Grove, Ore., and board member of the Oregon Beef Council, said he sympathizes with Pohrman's dilemma but wonders if she's making a mistake by turning away other producers.

"Denise (Pohrman) wants to help everyone and can't say no to the little guy," he said. "She's got a heart as big as the plant. But the world has bigger needs right now."

Thistlethwaite, of the Niche Meat Processor Assistance Network, said if small producers didn't have slaughter dates lined up months in advance, that's their problem.

"If you haven't figured out by now when your animals are ready for harvest, then you have no business trying to be a midscale producer until you professionalize your relationships," she said.

One Oregon meat plant owner who chose to remain anonymous agreed, saying many small growers call a week ahead expecting to get a slaughter spot.

Thistlethwaite said many small producers don't know they have other options.

She encourages small producers to consider custom-exempt slaughter, enabling them to sell animal portions directly to consumers.

The USDA labels many small processors as "custom exempt," meaning they are exempt from continuous federal inspections. Producers can sell portions of an animal — usually quarter, half or whole to customers. This is called selling live animals "on the hoof" as "locker meat."

The other option, said Thistlethwaite, is "retail-exempt processing." Retail establishments, such as grocery stores, may process and sell meat at the store. Limited meat can also be sold wholesale to hotels, restaurants or institutions. The animals must be slaughtered under USDA inspection but can be processed under Oregon Department of Agriculture inspection.

The catch is the producer must have a relationship with a butcher or know how to butcher. For that reason, said Thistlethwaite, this may not be an immediate solution.

Pohrman of the Mohawk plant said these exemptions fail to help producers selling to farmers markets, which require meat be both harvested and processed under USDA inspection.

In the past week, Pohrman has sent letters to the ODA, Gov. Kate Brown and others requesting an emergency exemption to help these producers.

Thistlethwaite said although big plant closures have caused disruptions, that's not the driving force behind small processors' sudden popularity. The bigger driver, she said, is demand. Consumers are eager for local food during the pandemic.

This craving comes after a long period of decline. Big meatpacking facilities have made meat relatively cheap in the U.S. and pushed smaller slaughterhouses out of business.

From 1990 to 2016, the U.S. meatpacking industry lost more than 1,800 slaughterhouses. The "Big Four" companies — Tyson, Cargill, JBS and National Beef — came to dominate 85% of the industry.

Hoyt of the Oregon Beef Council said the nation's meat infrastructure resembles an hourglass: on one end, producers and feedlots, on the other, consumers, with processors in the slender neck. Now, the neck is jammed.

"I think there's a real need for more small processors," he said.

But creating a local meat system isn't simple. Industry experts say building and running a meat plant is expensive, regulations are complex and competition is tough.

Even so, Thistlethwaite said she hopes the pandemic will result in more consumers supporting local producers and processors.

"I suspect after this initial hoarding phase, the demand is going to slack off considerably, especially since we're about to enter a massive recession," she said. "But if people want local meat to last, I hope nobody expects any quick fixes. Consumer interest can't just be a blip on the screen. That's not the kind of long-term commitment farmers need."

Instagram introduces new feature to support small scale businesses - India Today

Posted: 12 May 2020 12:00 AM PDT

Instagram on Monday rolled out a new feature to help small scale businesses that are badly affected due to coronavirus lockdown. Many users noticed a new story added to the Stories feed with "Support Small" written beneath it. On tapping on stories, the users could see the names of small scale businesses around them.

Announcing the new feature on Twitter, Instagram tweeted from its official account saying, "Today we're launching a "Support Small Business" sticker in stories so you can show love to your favorite small businesses. Use it and your photo or video will be added to a shared story where friends can see which businesses you support."

So if you want to promote your favorite businesses on the platform, you can add the "Support Small Business" sticker to your story and post a story to the Stories feed. This would enable other uses to see the sticker, which will help in increasing the visibility of the company that you are promoting.

"As many stores remain closed and social media serves as an online Main Street, the shift to doing business online is more urgent than ever. We're announcing new ways for people to support and discover small businesses, along with more tools for keeping businesses informed and connected with their customers," Instagram said in a statement.

As a report published in TechCrunch, Facebook is planning to add a dedicated Business Inbox to the Messenger App to make it easier for businesses to communicate with customers.

Facebook is also introducing a new feature called the Businesses Nearby, which allow users to see the latest updates and posts by the businesses near them on the social networking platform. This feature would help users in locating the shops that providing essential items and this would also help the businesses in connecting with the customers better.

"We want to do everything we can to support small businesses right now, whether that''s building new tools to help them stay in touch with customers or giving people the power to easily show their love to businesses they care about," said Instagram COO Justin Osofsky said in a statement.

Facebook will also post COVID-19 related information on its platforms including Instagram, along with tools and tips for small scale businesses. The information can be obtained by the businesses through the Facebook app or their Instagram handles.

The coronavirus pandemic has crippled the world in many ways and the small scale businesses and low-income workers have maximum challenges due to this. Tech giants like Facebook, Google are doing their best to support theme carry out their businesses in such trying times.

One in three small businesses close to winding up, says survey - The Indian Express

Posted: 01 Jun 2020 07:21 PM PDT

Written by Aanchal Magazine | New Delhi | Updated: June 2, 2020 7:36:19 am
coronavirus, coronavirus relief package, coronavirus lockdown 5, lockdown 5 guidelines, MSME relief package, Atmanirbhar Bharat Abhiyaan, Business news, Indian Express The AIMO survey comprises 46,525 responses from MSMEs, self-employed, corporate CEOs and employees. It was conducted online between May 24 and May 30.

AS UNLOCK 1 kicks in, more than a third of self-employed and small and medium businesses do not see any grounds for recovery and are on the verge of winding up, according to a survey by All India Manufacturers' Association (AIMO) in partnership with nine other industry bodies.

The AIMO survey comprises 46,525 responses from MSMEs, self-employed, corporate CEOs and employees. It was conducted online between May 24 and May 30.

While 35 per cent of Micro, Small and Medium Enterprises (MSMEs) and 37 per cent of the self-employed respondents said their enterprises were beyond recovery, 32 per cent of MSMEs said recovery would take six months. Just 12 per cent expected a recovery in less than three months.

The sentiment for business is more optimistic in the response from corporate CEOs who expect a recovery in three months, the survey showed.

Read | A day after Unlock 1, Cabinet approves economic package for MSMEs, farmers

"Scaling down of operations, uncertainty about future orders are among the major factors concerning smaller and medium enterprises, but the reasons for winding up businesses may not be completely due to the pandemic. The respondents were already facing issues in their businesses, whether from demonetisation or GST, over the last three years, along with a slowdown in the economy. Their debts would have piled up and the final nail in the coffin has been the Covid-19 pandemic", KE Raghunathan, former President, AIMO said.

"This kind of mass destruction of business has not been witnessed since Independence," he said.

India has seen one of the harshest lockdowns in the world, with gradual relaxations for resumption of economic activities being allowed after the third phase that ended May 17. Growing Covid cases in states including Maharashtra, Gujarat, Tamil Nadu and Delhi have posed challenges for full resumption of economic activity.

According to GDP data released last week by the National Statistical Office, the country's growth rate slumped to an 11-year low of 4.2 per cent in 2019-20. The RBI too recently said the growth may be in the negative territory in 2020-21.

Also Read | Piyush Goyal: 'Will achieve $5 trillion economy… won't let Covid affect resolve'

The AIMO survey also showed that only 3 per cent of MSMEs, 6 per cent of corporates, and 11 per cent of the self-employed respondents stated they will stay unaffected and will continue to do well, primarily since they were engaged in supply of essential services during the lockdown.

On a consolidated basis, the survey showed that 32 per cent of the respondents view their enterprise is beyond recovery, while 29 per cent of respondents stated that they will take six months to recover.

Read | Moody's lowers India rating citing low growth prospects

"Our business depends on the business of our clients. We are uncertain on whether they will continue, if so at what scale and how much budgets they will allocate to specific heads like design, marketing etc. We have been informed that they will revert only post October. This is a period of uncertainty for us – whether to search for a job or continue as a freelance designer," the survey quoted Ruhi Jani, a freelance designer, as saying.

MSMEs, which are over six crores in number in the country and employ an estimated 11 crore, are stressed due to depleting internal reserves and low visibility of demand. MSMEs make up for about 45 per cent of the country's total manufacturing output, 40 per cent of exports, almost 30 per cent of the national GDP, and operate across the value chain.

The government has announced emergency credit lines from banks and NBFCs to MSMEs of up to 20 per cent of their outstanding credit as on February 2, 2020, with these loans having a four-year tenor, a 12-month moratorium on principal payments, and a cap on interest costs. A total of Rs 3 lakh crore is projected to be disbursed under this scheme that will be open until October 31, 2020.

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