Coronavirus Paycheck Loans: Magic Johnson To Back Loans To Small Businesses

Earvin “Magic” Johnson said Monday his life insurance company will back $100 million in paycheck protection loans for minority businesses to ease the impact of the coronavirus pandemic.

Johnson’s EquiTrust Life Insurance Co. will work with MBE Capital Partners of Fort Lee, New Jersey, to offer the loans, Johnson told the Wall Street Journal. MBE CEO Rafael Martinez said EquiTrust’s investment likely will fund 5,000 paycheck loans, averaging $25,000 each, already approved by the Small Business Administration.

“What we’re launching here now is so important because we’re going to save a lot of small, minority businesses because they can’t just walk into the bank and get that loan,” Johnson said.

MBE Capital Partners is not a bank. The lender specializes in loans to minority- and women-owned companies.

“We’ve been picking up the people that nobody else wants,” Martinez told the Journal.

Small businesses have complained they have had trouble getting the paycheck loans through large banks administering the SBA lending program. Though the loans were supposed to be considered on a first-come, first-served basis, many companies complained banks were prioritizing their regular and larger customers.

Many large and public companies obtained loans from the original $349 billion paycheck fund. Several, including the Los Angeles Lakers and restaurant chains like Shake Shack, have agreed to return the money.

“We knew why the money was gone and couldn’t trickle down to small businesses, especially small minority businesses, because they didn’t have those great relationships with the banks,” Johnson said.

Congress approved more than $650 million for the paycheck loans, which are to be forgiven if 75% is used to pay workers. The program has been criticized as too restrictive for many companies to benefit from the loans. They say they need a longer timeline than the two months the original legislation gave for spending the money since many of those businesses currently remain still closed, and they need to be able to use the money for other expenses to keep from failing.

“When we conceived the program, we thought businesses would be able to get up and running after eight weeks, but we know now that’s not the case,” Sen. Ben Cardin, D-Md., said.

Sen. Marco Rubio noted the paycheck program has helped more than 4.4 million small businesses and saved more than 35 million jobs. He tweeted Sunday the program needs to be extended beyond eight weeks.

https://twitter.com/marcorubio/status/1262015059527643136?s=20