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Most of Ohio's $18 billion in Paycheck Protection Program loans went to only 15.5% of recipients

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Posted at 7:02 PM, Jan 26, 2021
and last updated 2021-01-26 19:38:51-05

CLEVELAND HEIGHTS, Ohio — A federal coronavirus bailout program meant to help small businesses survive the pandemic provided the majority of funds to only a small percentage of Ohio recipients, according to an analysis by 5 On Your Side Investigators.

PPP loan data
News 5 found 76% of the $18.48 billion in Paycheck Protection Program loans disbursed to Ohio businesses went to only 15.5% of the state's 147,868 loan recipients. In total, 22,969 recipients received $14.12 billion in PPP loans for at least $150,000.

Thirty-three Ohio businesses were approved for $10 million loans, the maximum amount available, including seven businesses in Northeast Ohio.

Among the Ohio businesses that received $10 million were Independence Excavating, Mazzella Companies, a Cleveland manufacturing company, and a White Castle franchise owner.

News 5 reached out to several organizations that received $10 million loans but has not received any responses.

We also reviewed the data for borrowers who received loans for less than $150,000 and found 84% of Ohio borrowers received only 24% of PPP funds made available to the Buckeye State. Data from the U.S. Small Business Administration, which administers the program, shows 124,899 Ohio PPP loan recipients received $4.35 billion.

The SBA released the PPP loan data Dec. 3 after the agency was sued by several media organizations under the Freedom of Information Act for failing to identify specific amounts awarded to borrowers who received loans for more than $150,000 and refusing to identify businesses who were approved for loans less than $150,000.

SBA response
SBA Regional Administrator Rob Scott said, "I know that number sounds terrible — that this is a massive amount of money is only going to 15% of businesses."

Scott said the rush to get money out the door quickly last spring meant larger businesses with established ties to banks ended up receiving funds first.

"When we first opened it up, back in April, we were building the plane and flying it at the same time," Scott said.

Scott said there are stricter rules in place for the second round of PPP funding, which is currently being distributed to small businesses.

He said smaller banks, lenders, and businesses are first in line. He said that will allow SBA to serve "underserved communities" that were "slightly left behind" during the first round of funding.

Scott also said there are tighter regulations in place to make sure funds go to legitimate businesses.

"It’s a more controlled output of the funds so that way we can kind of protect taxpayer money from fraud and abuse," he said.

RELATED: Farms? Or fakes? $6.9 million in COVID-19 aid approved for agribusinesses registered to OH homes

A report by the SBA's Inspector General last fall found "strong indicators of widespread potential fraud and abuse."

Fundamental flaws

Tad DeHaven, a research analyst with the Mercatus Center, a conservative think tank at George Mason University, said the Paycheck Protection Program is still fundamentally flawed, despite its good intentions.

“The system we created, while I understand why that’s the route policymakers chose, inevitably, you’re going to have fraud and disappointed people," DeHaven said.

Because PPP loans are linked to the size and amount of a business's payroll, DeHaven said businesses with few employees are always going to be left out or receive little support.

“It wasn’t how it was supposed to work, but it’s how it was going to work," he said.

He and his Mercatus Center colleagues have advocated for extending a line of credit to businesses based on their past earnings, instead of the number and cost of employees.

RELATED: How many Ohio jobs were saved by the $525 billion bailout? Good question.

"They’re not cookie-cutter," he said. "Each firm faces different needs and concerns and the one size fits all approach, it’s just not ideal."

However, he acknowledges lawmakers were faced with the difficult task of saving as many jobs as possible when the pandemic forced businesses to shut down last spring.

"There’s no easy solution here," he said. "Nobody was going to be 100% happy."

Destiny called

For the last year, Destiny Burns, the owner of CLE Urban Winery, has been determined her craft brewery-style winery and tasting room will survive the pandemic.

"It’s my life," she said. "I mean it really, really truly is. I’ve invested everything I have into it. to me, it’s like the beating heart of my day to day life."

The owner of CLE Urban Winery received a small PPP loan that helped her pay her winemaker.

Burns said she applied for every government program she could, including the Paycheck Protection Program.

"It's not easy," she said. “It’s a pretty high bar to apply for these things. There’s a lot of paperwork, there’s a lot of process that goes into it."

She was approved for a PPP loan fr $19,860. It was enough to keep paying her winemaker during the early part of the pandemic.

"I think my operation is better and more precise than it’s ever been," she said. "And, in part, it's because I’m applying for these programs."

'Pennies make dollars'

Cecil & Mary Solomon also applied for a PPP loan last spring. “I applied for everything out there,” he said. “I mean everything.”

The SBA also granted their request for a loan for their restaurant, C&M BBQ Grill.

But it wasn't enough to help them pay anyone. The Cincinnati couple was approved for just $100.

Mary Solomon wanted to turn down the money. “That’s ridiculous, for one business,” she said.

Her husband talked her into keeping Ohio's smallest PPP loan.

“It took me a week of putting in apps, supplying documentation, just to qualify for that $100,” Cecil Solomon said. “She said, ‘You can tell them to keep that.’ I said, ‘No baby, a hundred is a hundred.’”

“My grandparents used to tell me that pennies make dollars,” he said. “I wasn’t passing up or turning down any coins at that time.”

Mary Solomon was born in Jamaica and moved to Cincinnati in 1983, raising twin sons with her husband, who is the "C" in C&M BBQ.

Since they opened six years ago, Cecil Solomon said the couple's Caribbean-themed restaurant has employed mostly family members. The restaurant has survived on delivery and carry-out orders since May 15, when Ohio restaurants were allowed their doors.

Solomon said he initially applied for a PPP loan from Fifth Third Bank. When he didn't hear back, he said he applied again through another lender, CRF Small Business Loan Company LLC. Solomon said CRF told him he qualified for $100, based on his tax returns.

“I’m not knocking anybody who got serious funding,” said Solomon. “I’m happy for ‘em, as a matter of fact. But I just think there’s an imbalance in the system.”

Taking a breath

"The fact that they [the SBA] were able to do what they did is kind of miraculous in some ways," said Burns.

Burns also qualified for an Economic Injury Disaster Loan, which usually assists businesses damaged by natural disasters, like hurricanes and tornadoes. The SBA also covered payments on her existing SBA loans for six months.

“Now that I know I have some resources I know that I can work with, I’m able to take a breath," she said.

Burns said she used the bailout money to upgrade her website and strengthen her online business. She also installed a new air filtration system since her business does not have outdoor seating.

Eager to return home to Northeast Ohio after she retired several years ago, the Euclid native wanted a change of pace after working as a defense contractor and an intelligence analyst for the U.S. Navy in Washington D.C.

The entrepreneur said a pandemic wasn't in her business plan, but it also wasn't going to end her business.

She said "pure grit and the SBA" have kept her afloat so far.

"If didn’t have those resources and that working capital, this business may have closed," she said. "I was not going to let that happen without a fight.”

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