America's Paycheck Protection Program has been something of a disaster so far. Ostensibly created to aid small businesses affected by the coronavirus pandemic and the resulting economic downturn, millions of taxpayer-funded relief dollars have instead gone to not-small businesses like Shake Shack, Ruth's Chris Steak House and Potbelly Sandwich Shop. Add car sales giant AutoNation to that list—and in a very big way.
The Washington Post reports that AutoNation, a Fortune 500 company that posted $5.5 billion in revenue in Q4 2019, received $95 million in PPP loans. That amount is, as the newspaper reports, "more than triple the amount any company is known to have received through the fund." And after questioning by the Post, AutoNation's board voted Thursday to return the funds.
Though PPP loans are meant to go to companies with fewer than 500 employees to keep things afloat with much of the country on lockdown, AutoNation secured its funding by having its dealerships act as "separate affiliates of a single corporation." This allowed more than 81 stores to receive the money.
AutoNation has furloughed some 7,000 workers, two of which raised objections anonymously to the Post by saying that this massive company could've weathered the situation much more easily than a neighborhood restaurant or bakery. From the story:
“Small businesses don’t have investors or millions in cash and credit to weather this storm,” one of the company’s employees said. “AutoNation could have made it through without taking these loans out."
[...] Another employee, an AutoNation general manager, said it was “disappointing that a large publicly traded company can cloak itself in these different entities so it can reach out and grab these millions of dollars.”
The general manager said that all the decision-making was made by executives: “None of us at the store level had any idea that we were applying for this money. That was all done at the corporate level."
"That’s left these mom-and-pop retailers, restaurants, barbershops, day-care centers, so that they can’t get money because the swift attorneys at companies of our size can swoop in and get this money and they can’t. I just find it appalling. I don’t think that was the intent of the money,” the general manager said.
The $349 billion PPP fund was exhausted last week, leaving scores of smaller businesses unable to access the loans. While the federal government is not releasing a list of which businesses received money, or how much, many large corporations like the aforementioned Ruth's Chris have opted to give the money back after being publicly shamed for it. Several have said that they have access to other forms of capital in the interim.
But as The Indianapolis Star and other outlets have noted, while it is shameful for billion-dollar firms to snatch up money while actual small businesses shutter, the real problem with the program is this loophole that allows big companies with many locations to apply. That, and big banks have prioritized applications for very large companies to net the huge processing fees involved with getting the loans.
A second, $484 billion small-business aid package was signed into law today. Here's hoping it will go to actual small businesses this time.