Hundreds of American businesses that received PPP loans have filed for bankruptcy after the money ran out

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Nearly 300 American businesses that got as much as half a billion dollars in Covid-19 relief funds have filed for bankruptcy, according to a Wall Street Journal analysis of government data and court filings.

Many of the businesses, say the government loans were not enough to keep them in business as the coronavirus and lack of additional stimulus funds forced them out of business.

The companies that closed employed 23,400 people and received between $228 million and $509 million in Paycheck Protection loans, according to the report. Two hundred and eighty-five companies were identified by the Wall Street Journal as having filed for bankruptcy since August.

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“It hit, we had to shut down, and cash-wise it couldn’t have been worse timing,” Keith Clark, who is closing his Virginia wedding venue firm, Waterford Receptions, after getting a $500,000 PPP loan, told the paper. “Not only could we not keep employing people, we couldn’t pay utilities, and it takes a pretty decent amount of money to keep two buildings going.”

Because smaller companies often liquidate their businesses after running out of cash rather than filing for bankruptcy, they wouldn’t be seen in court filings, according to the Journal.

It is believed that the number of companies that failed despite receiving the covid-19 relief aid is likely far higher given that the feds have only released the names of big borrowers that received loans larger than $150,000, according to the Journal. This group is only about 13.5% of the overall participants.

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The total loan these big borrowers received accounted for only a small fraction of the $525 billion in loans that the Small Business Administration (SBA) approved under the Paycheck Protection Program, which was established by the $2.2 trillion CARES Act stimulus bill that Congress passed in March.

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Government did not estimate the risk of bankruptcy when the loans were given, since the purpose was to quickly get cash to businesses impacted by the coronavirus lockdowns to keep them afloat.

“That loan is going to be a general unsecured claim” in a bankruptcy proceeding, bankruptcy lawyer Thomas J. Salerno told the Journal. “If [unsecured creditors] get 5 cents on the dollar, that’s what the SBA gets.”

The Small Business Administration guaranteed the loans as long as the funds were spent on qualifying expenses such as payroll, the Journal reported, so the government will likely suffer significant losses.

Here are the big companies that depleted the payroll loans meant for small businesses