The PPP was designed to help small businesses weather fallout from the coronavirus pandemic. It did so by funding small and medium companies with 500 employees or less; the loan/grant was meant to cover up to two and a half months of worker compensation (capped at an annualized $100,000) or in other words, the Treasury would provide at most $8,333 per employee for 2.5 months. That, at least, was the theory – in practice, things ended up being different.
A casual search through the list of PPP recipients reveals that no less than 1,436 Investment Advisors applied for, and received PPP assistance, in many cases for well over $1 million. One of the most prominent firms, perhaps due to its daily appearances on CNBC, is Ritholz Wealth Management which as we noted previously repaid its PPP loan which according to the SBA was in the $350K-$1MM range. Ritholtz Wealth CEO Josh Bronwn even wrote a blog post explaining what he did in “Every cent, plus interest” in which he tried to justify why a successful RIA would need up to $1 million in government bailout loans.
Two weeks ago we paid back the entirety of our loan to JPMorgan Chase that we had borrowed under the Payroll Protection Program. Every cent, plus interest.
We’re replacing it with a traditional line of credit from Chase. We’ll probably get access to our line next month, with the intention of only having to use it in an emergency. Because of the uncertainty from the pandemic and resulting economic shutdown, we’re going to add this option to give us the financial flexibility to deal with whatever may come. This is not a judgment of firms that choose to apply for forgiveness of their loans, but we don’t need to. Aside from losing the revenue from our conference business and other events, we’re operating smoothly and counting our blessings, as are the majority of our business owner clients. We’re very lucky and I don’t take it for granted.
Be that as it may, we still have a question: as the SBA disclosed, the loan was for over $350,000 and up to $1 million, and yet according to the SBA only 4 jobs were projected to be retained.
We hope this is merely a typo because otherwise someone in the loan submission process might have had a bit of a trigger finger.
Then there is the curious case of another investment advisor and Tesla permabull, Gerber Kawasaki, whose PPP loan was approved just days after he claimed on twitter that the “PPP thing looks like a scam.”