The New York state pension fund is shifting an existing $50 million investment in a small business loan program to the federal coronavirus relief program, which has drawn public criticism following a problem-laden rollout.
The New York State Common Retirement Fund (NYSCRF) already allocates money into business lender Pursuit, which typically lends to small businesses in the state for working capital, equipment or to buy real property, the New York comptroller’s office said Monday. In 2017, the NYSCRF had a $400 million commitment with the lender.
But the change shifts $50 million into the federal Paycheck Protection Program (PPP), which Pursuit is also administering for the state. The NYSCRF is also considering redirecting another $100 million into the coronavirus relief effort.
The federal small business loan program forgives loans if employers use the funds to keep workers on their payroll for at least eight weeks during the coronavirus crisis. The loans can also be used for rent, mortgage interest, or utilities.
Thus far, Pursuit has directed $200 million to the state through the federal bailout program.
The loans, exclusively for New York businesses, are capped at $350,000. One-quarter is specifically meant for minority- or women-owned businesses.
“We are continuing to look for opportunities to help New Yorkers that are consistent with our fiduciary responsibility to the pension fund,” New York State Comptroller Thomas P. DiNapoli said in a statement.
In return for investing the capital, the NYSCRF gets a premium from Pursuit that is equivalent to the return from US Treasuries, which a fund spokesperson said is typically in the low single digits. Recently, US Treasuries have seen their yields drop, as nervous investors have bid up their prices. A 10-year Treasury returns just 0.63%, according to Bloomberg data.
The allocation change comes after reports of a bad start for the federal PPP, which was depleted early on, as large businesses corralled a chunk of the money. After coming under fire from the public, some employers, such as Ruth’s Chris Steak House and Shake Shack, returned their loans.
But other large applicants have not returned funds, leaving small business owners with 500 employees or less scraping at the bottom of the barrel for funds.
“New York small businesses are facing unprecedented challenges that have put more than a million men and women out of work,” DiNapoli said. “We’re doing what we can to help small businesses keep employees on their payroll, even if they may have paused operations.”
Earlier this month, the comptroller said the state came out of March with more cash than it expected, but warned that the cushion would erode quickly without federal aid.