(TNS) — More than one-third of the funds Illinois businesses and nonprofits received through the federal Paycheck Protection Program went to less than 2 percent of participants, according to data released late Tuesday by the Small Business Administration.
Nearly 4,000 businesses in Illinois received loans of $1 million or more, adding up to $8.67 billion, or 38 percent of the total. In Illinois, the SBA approved more than 221,000 loans worth nearly $23 billion, according to the newly published data.
The agency released the data under a court order in a federal lawsuit filed by news organizations, making public the names and loan amounts for millions of recipients of the forgivable federal loans.
The SBA previously released the names of more than 650,000 businesses nationwide that received PPP loans between $150,000 and $10 million — the maximum allowed under the program — but did not disclose the exact loan amounts for larger borrowers or the identities of those who received smaller amounts.
The new data shows that while the majority of Illinois borrowers got smaller loans — about 88 percent were for less than $150,000 — the lion's share of the funds went to the largest borrowers.
There were 36 businesses in Illinois that received the maximum $10 million, including the publicly traded Chicago-based restaurant chain Potbelly, which returned its first $10 million loan in April under public pressure, but then reapplied in August as demand and scrutiny waned.
Other $10 million loan recipients include Alpha Baking in Chicago, MVP Workforce in Deerfield, the American Academy of Pediatrics in Itasca and Illinois Bone & Joint Institute in Des Plaines.
The list of larger recipients includes a number of high-profile Chicago-area companies such as Jellyvision Lab in Chicago, which received $8.4 million in April to support 51 jobs. Mario Tricoci Hair Salon in Palatine got a $9.9 million PPP loan in April for 500 jobs.
Oberweis Dairy in North Aurora received $5.7 million in April to support 500 jobs, according to the SBA data. Jim Oberweis, a Republican state senator who recently lost a close race to incumbent Democratic U.S. Rep. Lauren Underwood in the west and north suburban 14th Congressional District, is chairman of the family-owned dairy.
The new list includes the names and addresses of nearly 194,000 Illinois small businesses, sole proprietorships and nonprofits that received PPP loans of less than $150,000.
The loan recipients range from Encore Space Solutions, an East Dundee garage remodeler which obtained a $149,999 loan in April, to a dozen recipients who received $100 or less, according to the SBA data.
In between, the smaller PPP loan recipients include a plethora of restaurants, lawyers, dentists, auto repair shops and hair stylists, among other diverse businesses.
In November, a Washington federal judge ordered the SBA to publish detailed information for all borrowers — including those who obtained loans under $150,000 — following a lawsuit brought by news organizations under the Freedom of Information Act.
"The weighty public interest in disclosure easily overcomes the far narrower privacy interest of borrowers who collectively received billions of taxpayer dollars in loans," U.S. District Judge James Boasberg wrote in his Nov. 5 order.
Launched in April at the onset of the COVID-19 pandemic, the PPP offered businesses with fewer than 500 employees forgivable loans of up to $10 million, if 60 percent of the money went toward payroll. The program wrapped up on Aug. 8 after approving more than 5.2 million loans totaling $525 billion.
The new disclosures provide greater transparency for a program that has been beset allegations of inequity and fraud since its inception.
In September, a House subcommittee on the coronavirus crisis found that billions of dollars in PPP loans may have been diverted to "fraud, waste and abuse" through lack of oversight from the SBA and the Treasury.
The House subcommittee released a final report in October that concluded the program favored larger, wealthier companies and "failed to prioritize small businesses in underserved markets, including minority and women-owned businesses."
The Justice Department has charged 88 people for alleged PPP loan fraud totaling more $250 million nationwide, including a number of cases with Chicago connections. Among the more high profile, former Chicago Bears wide receiver Josh Bellamy was one of 11 people arrested in September and charged in a Florida federal court for allegedly seeking more than $24 million in fraudulent loans.
There have been two PPP fraud cases filed in Chicago federal court. In August, Elgin restaurateur Melissa Turasky was indicted on charges that she obtained a loan of more than $175,000 for a restaurant that had already closed. Evanston business owner Rahul Shah was charged in June, accused of falsifying information on his $441,000 loan application for technology company N2N Holdings.
Bill Phelan, co-founder and senior vice president of PayNet, a Skokie-based company that tracks small business commercial lending for the credit industry, projects that about 5 percent of PPP loans, or roughly $26 billion, may ultimately prove fraudulent.
PayNet used its large proprietary database of small business loans to compare with the data previously published by the SBA, looking for discrepancies such as multiple businesses at one address, and mismatches with designated industry, number of employees and annual revenue.
Analyzing the newly released data will enable PayNet to get a more accurate projection of potential fraud, Phelan said. One area of focus will be loans that came in just under $150,000, a potential cutoff Congress has been considering for blanket forgiveness.
"There's a whole bunch of loans that are just a few dollars below the $150,000 threshold," Phelan said. "That's kind of curious. "
While the loans are guaranteed by the SBA, borrowers must apply through their lenders to have the full amount forgiven. In October, the SBA released a simpler forgiveness application for loans of $50,000 or less, which encompasses about 71 percent of Illinois borrowers, SBA spokeswoman Andrea Roebker said.
The SBA began approving loan forgiveness applications in early October. As of Nov. 22, the SBA made more than $38 billion of payments to lenders toward more than 367,000 loans. That means about 7 percent of PPP loans have been forgiven.
JPMorgan Chase was the largest PPP lender by loan value, issuing more than 280,000 loans worth more than $32 billion, the bank said. In Illinois, JP Morgan Chase processed 23,100 loans totaling $2.4 billion. Jeffrey Kunkel, Chicago market manager of Chase Business Banking, said in an email Tuesday all borrowers will receive an email invitation to request forgiveness by mid-December.
One wrinkle in the forgiveness process is a ruling last month by the IRS that businesses cannot take common deductions for expenses such as payroll and rent if they are paid for with proceeds from PPP loans rather than normal income.
Once the PPP loan is forgiven, it becomes a tax-free grant, eliminating any expense deductions associated with the income, the IRS said.
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