Paycheck Protection Program For Small Businesses During Pandemic Had Loopholes The Paycheck Protection Program is designed to help small businesses from falling off a cliff during the pandemic, but some companies on firm ground have gotten millions to expand.

Loopholes In Small Business Relief Program Allow Thriving Companies To Cash In

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STEVE INSKEEP, HOST:

Here is the harsh math of the Paycheck Protection Program. Hundreds of billions of dollars in U.S. government loans are not nearly enough for every small business in need. So when one company gets a loan, it means that others may not. That's why it matters that a company received millions at the very moment that its business was booming. NPR investigative correspondent Cheryl W. Thompson reports.

CHERYL W THOMPSON, BYLINE: If there's one sector of the economy that's in high demand right now, it's medical testing. Earlier this month, Long Island-based Chembio Diagnostics was one of the first companies to get emergency FDA approval for a blood test to detect COVID-19 antibodies. And, says board member and former Interim CEO Gail Page, they're looking to grow.

GAIL PAGE: In order for us to ramp up and do the things we need to do to increase our manufacturing capabilities, you know, we felt like having this supplemental, you know, dollar amount or law would be very helpful in helping us. And it employs people.

THOMPSON: The loan she's referring to is the SBA's Paycheck Protection Program. Chembio makes diagnostic tests for all kinds of infectious diseases. They worked on HIV, Ebola, Zika and others. FDA approval of the company's finger-prick COVID-19 test created a huge opportunity. Their stock price averaged about $5 a share over the last year. Yesterday, it closed at about $11. The paycheck protection loan would give them the liquidity to help them grow. They applied for and got nearly $3 million.

PAGE: When you get these pandemics then there's, all of a sudden, this big rush. And you need to be able to supply.

THOMPSON: The problem is that's not what the Paycheck Protection Program is designed to do.

MARC GOLDWEIN: The goal here isn't to expand the size of companies. The goal here is to kind of keep them alive while we get through this crisis.

THOMPSON: Marc Goldwein is the senior policy director for the Committee for a Responsible Federal Budget in Washington, D.C. He says the program is for companies that are struggling, losing customers, laying off employees, on the brink of shutting down.

GOLDWEIN: Companies have to self-certify that they need this money because they are experiencing adverse effects. If they are not experiencing adverse effects, it's probably inappropriate.

THOMPSON: Gail Page says it was totally proper for Chembio, which has gotten government grants over the years to work on diagnostic testing, to take the paycheck protection money.

PAGE: When you have a crisis like this, a lot of the customer base that you depended upon your revenue, it kind of slips over here to the side. So in order for us to stay viable, you know, we felt like we needed to participate. And stock price doesn't represent, necessarily, cash in the bank.

THOMPSON: One issue with the first round of disbursements was that the law was murky. Florida Republican Senator Rick Scott expressed concern last week that companies not hurt by the pandemic found loopholes and got millions of dollars. And remember, even though they're given this loans, most of the money will be forgiven by the government as long as it's used appropriately. Earlier this week, officials began issuing a second round of loans, $311 billion. The question is whether mistakes will be repeated, Goldwein says.

GOLDWEIN: In fact, in this next round of funds, it looks like the SBA will be doing some more oversight.

THOMPSON: Treasury Secretary Steve Mnuchin has told companies that received money but may not have qualified that they have a grace period to return it. The SBA told NPR that $2 billion has been declined or returned so far. That money will now be available in the current application process. Gail Page, the board member at Chembio, says the company hasn't decided whether to return the nearly $3 million loan it received.

Cheryl W. Thompson. NPR News.

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