Coronavirus

Santa Cruz County Loan Recipients See Errors in Federal Data

Michael’s on Main did not receive a $5 million to $10 million loan

Paycheck protection loans were a lifeline to businesses and nonprofits. The data had errors.

Michael’s on Main owner Michael Harrison was relieved when his restaurant—which shut down for two months, amid the Covid-19 pandemic—pulled in a forgivable federal loan.

The cash let Harrison keep his business afloat and to continue paying his employees. “We’re moving forward and hoping for the best,” he says.

What he didn’t know was that the Small Business Administration (SBA) reported that Michael’s on Main had taken in a Paycheck Protection Program (PPP) loan of $5 million to $10 million. That number was way off.

“Oh, God, no. Ours was under $150,000,” he says.

The idea of a forgivable loan worth millions baffles Harrison.

“They’re saying I got that much money? That’s absolutely nuts. I wouldn’t have qualified for that,” he says.

Many businesses around the country have reported similar errors.

It has been difficult for journalists and members of the public scouring over the SBA data to separate fact from fiction. Here in Santa Cruz County, much of the attention has focused on the reported sizes of loans given to Michael’s on Main and to the Calvary Episcopal Church on Center Street.

According to the SBA data, the church took in a $350,000-$1 million loan. The actual size of its loan was under $50,000.

The faulty numbers were reported by GT, by Santa Cruz Local and on Santa Cruz’s subreddit. Due to the size of the loans, the SBA should not have publicly released information about either of them. The SBA was supposed to withhold the names of loan recipients who took in less than $150,000.

PICKING UP THE TAB

Harrison says he spent 60% of his loan money on payroll, with the other 40% going to other costs, like food, rent, cable, internet, PG&E and the restaurant’s information technology account. Under federal guidelines, PPP loans will be forgiven, so long as businesses spend at least 60% of the money on payroll.

Meanwhile, Harrison and his colleagues have spent the last four and a half months navigating the constantly changing nature of what businesses are and aren’t allowed to do. Right now, Michael’s on Main is open for outdoor dining, and patrons must wear masks. 

FED UP

The errors in PPP data have raised eyebrows around the nation. Investigations—including ones from the Washington Post and Bloomberg—have found numerous irregularities around the PPP program.

For instance, the maximum PPP loan for a one-person enterprise was supposed to be $20,833. However, Bloomberg found that more than 75,000 loans listing one job retained had higher amounts—including 154 showing $1 million or more. Many other businesses pulled in loans that appeared too small, given the size of their payrolls. Those combined errors called into question the numbers for more than one out of every five businesses.

In its analysis, Bloomberg journalists said that the anomalies cast doubts about the accuracy of the data for the centerpiece of the $2.2 trillion relief package. They added that it’s unclear whether the program really saved 51.1 million jobs—the number reported by the feds.

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