Billionaire entrepreneur Mark Cuban said Monday that the recently launched small business loan program has been beset by challenges that could impact the long-term outlook for companies.
“Banks are playing themselves. They’re being banks and they’re trying to determine if the credits are good and that’s leading to a lot of small businesses that are left out in the cold,” Cuban said on “Squawk Box”.
“We are at an inflection point” to get money into the system for businesses of all sizes, he said.
Cuban, owner of the NBA’s Dallas Mavericks, said the companies he’s invested in as part of “Shark Tank” have faced challenges in applying for the loans. Cuban said some banks have questioned a company’s gross margin and was therefore uncertain about making the loan.
“I’ve tried to call the banks and say, ‘No, that’s not the point behind the [Paycheck Protection Program] loan.’ This is not about that. This is a guarantee by the government and this is supposed to turn into a grant if you retain all your employees,” Cuban said.
Cuban said banks have “implemented all these hurdles” that were not supposed to be a part of the program, which was established by the government’s $2 trillion coronavirus relief package that was passed in late March.
“Until we get through that friction, there’s going to be a lot of issues and there’s going to be a lot of people laid off and a lot of companies that go out of business,” he added.
While there was initially $350 billion set aside for the small business loan program, Treasury Secretary Steven Mnuchin has said the government will supply more funding, if necessary.
The government turned to banks and other financial institutions such as credit unions to help it distribute the small business loans. Additionally, fintech players such as PayPal and Intuit QuickBooks said Friday that they were granted approval to participate from the Small Business Administration.
Cuban said he hopes the distribution of the PPP loans improves like what happened after the stumbled launch of health-care exchanges from the Affordable Care Act.
“Hopefully, it will be the same way here, that we’ll get another tranche of money and the second tranche will have clearer rules and banks will recognize that this is not a typical credit environment where you’re supposed to analyze each application as it was a new loan,” Cuban said.
“This is a hurry-up environment where we need to get money in small business’ hands so that they can retain their employees,” he said.
Cuban has been particularly outspoken during the coronavirus pandemic. He has put pressure on Washington lawmakers to prioritize workers in economic stimulus legislation. He’s argued any company that receives government aid in such legislation should be prevented from buying back its stock.
Cuban has also advised business leaders against sending their employees back into the office too soon, warning that doing so could “define their brand for decades.”
Source: CNBC