Grueling Path
“There would have been very significant technology costs and payroll or opportunity costs by having to shift our folks to service these loans,” said Richard Wayne, chief executive officer of Lewiston, Maine-based Northeast, which sold $457.6 million of PPP loans to LaHaie’s firm. “We made the business decision that we would be better off selling the loans and not having to be burdened with doing the servicing.”
LaHaie knows it’ll be a grueling couple of years servicing thousands of small-business loans, but he figures the firm can make decent money, virtually risk-free, because the loans are backed by the U.S. government. The Fed charges 35 basis points to use its credit line. That comes with pretty favorable terms for a borrower -- 100% financing and no recourse.
LaHaie, a Michigan State University graduate who previously worked as a managing director at ExWorks Capital, a senior secured debt fund, already has 60 to 80 people working with businesses that hope to get their loans forgiven. He predicts about 80% of borrowers actually will.
Less certain is the degree to which the taxpayer funds have helped those reeling from the economic fallout caused by the pandemic.
“If the goal of the program was to save jobs in the short term,” Harvard’s Chetty said, “this was not a very efficient way to do that.”
This article was provided by Bloomberg News.