We're Here From The Government And We're Here To Help

On today’s show we’re talking about the help that comes with many well intentioned government initiatives. Today’s show just makes you go Hmmm. I wonder what they were thinking.

Today we’re taking a closer look at a number of pandemic help programs that seem to have veered off their originally advertised objectives. There are so many of these stories, I’m just going to give you a sampling. There’s simply too many to cover in 5 minutes.

Back in the Spring, the Federal reserve announced with much fanfare that it would take $75 billion dollars appropriated by Congress and through the magic of its printing press turn it into $600 billion dollars in assistance for mid-sized businesses through its main street lending program.

Now 8 months into the program, and the banks have written less than $6B in loans. This is 1% of the funds that were promised under the program.

The Fed doesn’t have the ability to give away money, but they can lend it.  The banks would still have to absorb 5% of the loan losses and the fed would absorb 95% of the loan losses. Banks don’t like to lose any money, so they underwrote the loans very conservatively. If a borrower qualified as a good credit risk, then the banks loaned money through their commercial loan desks without help from the Fed. If they didn’t qualify, then the banks generally declined to fund the loans, despite the Fed assurance of backing 95% of the loan losses. The sliver that actually qualified was less than 1% and it wasn’t because the businesses don’t need the help this year. 

The pandemic has put enormous burden on healthcare systems around the World. Canada welcomes about 49,000 refugees or asylum seekers into the country each year. While they’re waiting for their refugee claim to be assessed, they have the right to get a job. Many end up working in numerous low paying jobs like call centres, or as personal support workers in long term care facilities and nursing homes. During the peak of the pandemic in the Spring, Canada’s Federal Government announced with much fanfare that it would allow personal support workers to shortcut being accepted as permanent residents in Canada if they commit to continuing to work as personal support workers for a minimum six month period. It took 7 months following the announcement for the government to publish their 60 page guide on how to apply and the 25 page application form. Within a week of the forms and the guide being available, a new guide was published with new qualification regulations.

The Small Business Administration department of the US government was tasked with administering two different programs to assist small businesses. The first was the pay check protection program which would provide up to 12 weeks of salary in the form of a loan provided you kept your employees on payroll for a minimum of 8 weeks. But the problem is that 12 weeks of payroll assistance is not enough to support businesses that are now in month 9 of a pandemic. Very few businesses are sitting on enough cash to survive 9 months of economic collapse.

The second SBA program was the Economic Injury Disaster Loan. The EIDL is not a grant, although the first $10,000 could be a grant under certain circumstances. It’s a loan at 3.75% for up to 30 years.

Governments all over are scrambling to try and figure out how to help save the economy. I don’t envy the job of government. They have a nearly impossible job. Even the assistance that some businesses are receiving will not be enough to save them. So if your business has been impacted by the pandemic, don’t just sit back and wait for government to save you. You have the agency to act and be responsible for your own business success.