Why SBA PPP and EIDL Stimulus Package Failed – How to Fix!

Day after day, news is released that shows how Congress, SBA, and Treasury completely botch the rollout of this stimulus package.  I only partially blame Treasury and SBA, as they are just implementing what the Congress passed in the Coronavirus Aid, Relief, and Economic Security Act, or better known as the CARES Act.

However, this video is not a blame this guy vs the other guy.  I only want to bring up discussion on some issues with the PPP and EIDL in hopes that we as a country can learn from these mistakes and better handle a large-scale disaster.

Part of my analysis is in hindsight, and I know we have all heard the phrase: “hindsight is 20/20.”  Yet, I still think much of this was so obvious at the beginning, there really is no valid excuse.

I know most of my viewers have been following along, but for anyone new here let me give you a quick 30-second overview. 

Congress passed the CARES Act which has multiple stimulus programs wrap into this piece of legislation. 

Today I will be focusing on the Payroll Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL).  The PPP is the “free money/forgivable loan” program you hear about that gives a small business 2.5 months of payroll money to help keep Americans employed. 

Then there is the EIDL and this is a low-interest emergency loan for small businesses to help with other business costs.  This was originally supposed to give all businesses a $10k free grant within three days to any business that applied for the loan, but that never materialized.  See my other video about the grant money.

Ok, now with all of that out of the way, but before I get to today’s update.  Please make sure you like and subscribe to this channel.  I know it sounds like I am begging, and yup, I am!  By liking, subscribing, and commenting on my videos it really helps with the YouTube algorithm.  Thanks

No matter how well-intentioned the members of Congress were, they are all career politicians, and most have never worked in, or owned a small business.  I am not talking about their side hustles where they sell books or go on speaking tours, no!  I mean real small businesses: laundromats, gas stations, hair salons, small restaurants, plumbers, electricians, family-owned retail stores, etc.  Obviously, this list could go on forever, but you guys get the point – and because they have never been in this situation, they do not really understand small businesses.

Couple their lack of understanding of small businesses and add on top of that the inefficiency of government bureaucracy and you have a perfect recipe for a cluster [you-know-what].

A little mentioned fact of the $350 billion dollars allocated to the PPP loan.  Banks were paid a commission of between 1- 5% of the loan value, which equates to between $3.5 – $17.5 billion dollars wasted, not going to small businesses. 

Look, I am an entrepreneur, and I have no problems with a business (even a bank) making money.  But this program never needed to loop the banks into this process to the level they did.  Trust me, in just a few minutes I will go over a nearly foolproof plan that would have been much easier to implement and would have fixed all of these problems.

Not to mention the largest elephant in the room.  $350 Billion dollars is supposed to cover 2.5 months of payroll, right?  Hmm . . . well, Houston we have a problem.

Per the IRS there were $5.5 trillion dollars in payroll for the calendar year 2017 for individuals making less than $250,000 per year.  If you divide that by 12 you get a monthly payroll nationwide of $485.5 billion.  So, the $350 billion allocated would be spent in about three weeks, not the 10 weeks it is proposed to cover.  

I know, you are going to say “but wait, the PPP is only for small businesses, not big corporations.”  Ok, true.  Based upon IRS statistics 50% of persons employed in the US work for a small business, so even if you half the numbers I just mentioned, you only get about 5.5 – 6 weeks covered with the PPP, not the 2.5 months.

This whole stimulus package is like an ice-cream sundae of governmental incompetence.  First, a few scoops of ‘ain’t got a clue flavored ice-cream’, add some bureaucracy sprinkles, then finally cover the whole mess in abuse and corruption flavored hot fudge.  Sounds yummy, right?

I want to make it clear this is not a Republican vs Democrat issue, this is an issue of the ruling class in DC, not understanding Main Street.  Of course, both sides played politics, but come on, they are politicians, what do you expect?

Ok, so I have complained enough.  If I, a non-politician, businessman were in charge, what would I have proposed instead?

I would have had Treasury take the data from IRS 940: Employer’s Annual Federal Unemployment (FUTA) Tax Return, specifically line #3 “Total payments to all employees” and used this number to know what the annual payroll spend of each business is. 


For example, if a business has an annual payroll spend of $482,653, divide that by 12 to find a monthly spend of $40,221.08. 

Ok, so far this is similar to the current PPP, here is where it gets improved:

Instead of the current PPP forgivable loan that must be applied for through a local bank with all of the complexities of a loan process.  A simple online verification process where a business enters the numbers from his 940 (or 941 for Quarterly) and his banking routing number information into the SBA website.

This online portal could print out a verification sheet showing the bi-weekly, monthly, or quarterly payments the business makes to the IRS as part of their payroll tax withholdings.  This would list the transaction amounts to the penny.

With this piece of paper, the business owner can take that information to their bank.  The bank would be paid a flat $1,000 fee to “verify” the business checking account on the paper is the same bank account used for employee payroll and cross-reference the exact amounts listed on the single-page verification document.

This verification process should take no more than 10 to 15 minutes at the bank.

Once verification is made, the bank could log in to a secure online portal at the SBA to “ok” this business.  Within 24 hours Treasury could begin depositing weekly amounts into the business’ account to cover payroll while the country is on lockdown.

This entire process, should, start to finish take the business no more than an hour or two to complete and would have had money flowing in days, not many, many, weeks like the current PPP.  With many businesses 3+ weeks into the current process, still with no money.

As long as businesses keep their employees on payroll (even if the business is shut down to customers, payroll continues) then the money is a grant.  If the business mass fires employees, the money is a loan and paid back in full within 1-year.  The goal is to keep people employed.

This solution would fix the payroll issue, but of course, businesses have many other expenses beyond just payroll.  This is where the EIDL comes in.

First off, the $10,000 grant should be removed and not be part of this process.  With my proposed idea it is not needed.

EIDL should have been awarded as a loan based upon the business’s 2019 tax returns.  SBA could have taken the US Corporation Income Tax Return form 1120 from the IRS, read line 11 for Total Income, divided that number by 52 to find an average weekly income for the business.

SBA could utilize the same bank verification process as the PPP, in-fact if a business uses the same checking account number for the PPP and the EIDL then they can combine the verification into a single step at their bank.  If they use different checking accounts, then a second verification paper would be required.  Once again, this should only take about 10 minutes with a teller at your bank.

Once verified, SBA would begin weekly deposits into the business bank account for as long as the nationwide shutdown takes place.

The EIDL would be a LOAN, not a grant, but with a 30-fixed rate at 1.75%, payments delayed for 1-year starting on the date of the last weekly payment.  Businesses could opt-out at any time.  The loan would have the same protections for the government as IRS tax liens and would not be forgivable in bankruptcy to prevent abuse.

As long as a business is opted-in, they do not need to reapply each week.  The auto-deposits continue until either the nationwide shutdown is removed, or the business chooses to opt-out. 

The EIDL would not continue past the last day of a nationwide shutdown, even if a state or local city chooses to keep lockdowns in place for a longer time.  It would then be the responsibility of the state or town to offer loans/grants to businesses for this additional time.

These two programs, as I proposed would have simplified the process, removed processing costs, and most importantly shorten the time from the beginning of the pandemic to people getting the money they need.

Of course, no program is perfect, this will be expensive and generations to come will be paying for this in the form of inflation and higher taxes, but I argue my proposal would be lightyears ahead of the current program.

This then brings me to the topic of who pays for this, do we leave it for our grandchildren or do we have other plans? 

Some in the US Government and a few in the media have been talking about making China pay for these costs which collectively will be more than $5 trillion dollars in losses by the US alone.

It is very clear that China and the WHO covered up and downplayed the initial situation of the COVID 19 outbreak in Wuhan, China. 

Personally, I do not think, China released this virus on purpose, it appears to be an accident, and they originally thought they could contain it.  If instead, they would have been more open and honest about the infection and transmission it would have seriously cut the death rate and financial losses worldwide.  Their negligence contributed to the loss.

Currently, our national debt sits at around $24.4 trillion as of March 17, which I do not think includes the current stimulus costs and projections.  Out of this $24.4 trillion, China holds about $1.1 trillion of that debt.  The idea that is bouncing around is to have the Congress pass a bill to ‘write-off’ the balance we owe to China as part of a settlement of the costs of the COVID outbreak. 

While I am not defending China, my issue with this proposal; I feel this may cause more problems in the long run.

For example, would this cause other countries to fear to invest in the United States if there is concern that the US could just writeoff that debt at any time and refuse to pay a specific country for political reasons?

Thanks for watching, I really hope you enjoyed the video.  Please make sure you like & subscribe.  Don’t forget to check out the webull link and grab your two free stocks today!

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