Closer Look: Big York County firms ate up bulk of PPP funds

Relatively large employers in York County received more than 70% of federal Paycheck Protection Program funding doled out locally, a program proponents said was in part intended to keep small businesses afloat during the coronavirus pandemic, according to an analysis by The York Dispatch.

The disproportionate approval of large federal loans in York County surfaced after the U.S. Small Business Administration on Monday released a list of companies that received forgiveable loans offered through the program.

The data released by the SBA breaks down loans into two tiers: Those less than $150,000 and loans that were more than $150,000.

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In York County, at least $232 million in loans were doled out under the program. Of that, loans of less than $150,000 accounted for roughly $62 million, or 27%. About $170 million, or 73%, went to firms seeking more, often significantly more.

For example, Maple Donuts received between $2 million and $5 million, but it's impossible to tell the actual dollar amount based on available data. 

The largest loans in York County, ranging from $5 million to $10 million, went to SpiriTrust Lutheran, OSS Health, Precision Components Group and Wagman Inc.

The program, first implemented in the federal CARES Act in March, was meant to be a lifeline for small companies and their employees.

But experts have already begun to see problems with the program.

"Without some important changes, many genuine small businesses will continue to fall through the cracks," wrote Aaron Klein, a fellow in economic studies at the Brookings Institution, in an op-ed to Politico.

One solution Klein offered was to cap all loans at $1 million, as "only 4% of the loans made in the first batch (of the PPP) were for more than $1 million, but they ate up 44.5% of the initial $349 billion Congress put into the program."

And the estimates used by The York Dispatch, based on the SBA data, are probably on the low end.

In York County, roughly 81% of the  2,076 loans distributed  were less than $150,000, even as that group's share of the dollar total was less than 30%.

On Capitol Hill, approval or disapproval of the Paycheck Protection Program has often been partisan.

"I am concerned that the Paycheck Protection Program has not done nearly enough for truly small, women, veteran and minority-owned Main Street businesses," said U.S. Sen. Bob Casey, D-Pa.

Yet Republicans, such as U.S. Rep. Lloyd Smucker, R-Lancaster, have argued the program has proven to work as intended.

Smucker spokesperson Eric Reath noted that 86.5% of loans supplied by the program nationwide were less than $150,000 each, which he said demonstrates the program is "truly assisting the smallest businesses."

"This program is unquestionably helping businesses preserve thousands of family-sustaining jobs in PA-11," Reath said.

Some local businesses have agreed, saying the loans have proven to save jobs.

SpiriTrust Lutheran, a not-for-profit, faith-based organization that provides services ranging from assisted living to rehabilitation and counseling, received $6.75 million — allowing the company to retain its 900 employees.

That's particularly important because the company serves older adults, who are more vulnerable to COVID-19, said spokesperson Crystal Hull.

“For us, it’s keeping our team members employed and still doing their job and providing vital services in the community,” Hull said.

Corporations, though, made up a large piece of the pie in terms of their share of the loans.

Of the more than 390 larger loans disbursed to companies — which can total as much as $10 million each under the federal program — about $126.6 million, or 74%, went to companies listed as either corporations or "Subchapter S corporations."

As for the more than 1,600 smaller loans offered to companies, $30 million, or 48%, went to corporations or S-corporations.

Under the PPP, businesses are eligible to receive loans as high as $10 million, ranging from two- to five-year terms.

Initially, businesses had to use 75% of the funds to cover payroll costs for full forgiveness. That has since been lowered to 60% under the Paycheck Protection Program Flexibility Act passed last month.

Back in March, the initial $349 billion provided by the CARES Act for the program dried up in just two weeks.

Lawmakers then approved an additional $310 billion in late April, and it's unclear whether further funding will be made available.

This is part of a series at The York Dispatch. Periodically, Dispatch staffers will delve into a new topic that we believe deserves a Closer Look.

— Logan Hullinger can be reached at lhullinger@yorkdispatch.com or via Twitter at @LoganHullYD.