“I’ve got money in the bank, I just can’t use much of it.”
Talk to small business owners who were fortunate enough to receive a Payroll Protection Program (PPP) loan, and you will probably hear them utter the words above.
PPP absolutely provided much-needed relief to small businesses devastated by this crisis by giving them the ability to pay their mortgages or rent, utilities, health care costs and the payroll costs for the employees they were able to keep. The amount they received was based on this very narrow list of expenses for 2.5 months, and the loan is only forgivable if they use it for these purposes. The hope was it would give employers funds to keep all of their employees on payroll.
But though very well intentioned, PPP just did not get administered to businesses (at least those who really needed it) fast enough for most to maintain their entire pre-COVID-19 payrolls. But even if it had, many would have paid their people for 2.5 months and then immediately laid them off because they had no revenue coming in.
After the first round ran out and the Shake Shack/Ruth’s Chris/Lakers stories made headlines, many nervous business owners who were trying to hold on, furloughed or laid off employees right then, thinking they would never get it and knowing they would not be able to make another full payroll.
And though it was also well intentioned, it is no secret the generous unemployment package Congress passed has made it very difficult for a lot of businesses to get some employees back as they are trying to reopen, particularly in the service industry. Yes, you can report people who refuse to come back, but it is very difficult to say no to employees (who have never made this much money in their entire lives) begging you to let them stay on unemployment so they can save up as much as possible in order to feed their families in these very uncertain times. It makes it particularly hard to say no to an employee when you are not certain if their job will, in fact, be secure.
Revenues have taken a tremendous hit, and it is impossible for any affected business owner to know when or if they will ever get back to where they were before this crisis. And it may unfortunately require some or many to be much smaller organizations until they do, especially when there is all this talk of a “second wave.” If there were another shutdown it would be impossible for many businesses to survive. It remains to be seen if they will be able to climb back out of the hole and survive this one. That is just the grim reality.
There is talk of more federal packages coming and, of course, those would be welcomed, too. But many businesses already have money sitting in the bank from PPP that could be put to great use right now (no more waiting!) and would stimulate the economy — they just can’t because of the current restrictions on those funds.
Congress is talking about easing these restrictions, and it would be the single biggest and fastest way to help most small businesses survive right now.
And there is more than one way they could skin this cat.
For instance, they could extend PPP to be forgivable for payroll expenses for longer than 2.5 months from the day the loan was funded — that would give employers a chance to get up and really running again and rehire as many as they can (and when they don’t have to compete with the generous unemployment package anymore).
Also, allow businesses to use it on the expenses they really need help with right now in order to keep the doors open (so they can rehire!!!!), whether it is to pay food suppliers for restaurants, inventory for retail or print bills for small locally owned newspapers in Mobile, Alabama (wink, wink!).
In addition, restaurants, bars and close-contact businesses are going to need PPE and Plexiglass and all kinds of new equipment — do you think they are going to have a budget for that after being closed this long? Let them use PPP funds for those purposes. It would certainly help with public health and prevention of another shutdown.
Also, allow all businesses to use a percentage of their PPP funds on marketing and advertising. No one really has much of an advertising budget right now (and they probably won’t for some time), but the sad irony is they’ve never needed one more than they do now — to announce reopenings, new hours, new practices (capacity restrictions, mask requirements, etc.). And this would help keep local news outlets (who are providing an invaluable public service, but have also been hit particularly hard by this crisis) afloat, while also driving business to these companies who desperately need people to walk in their doors right now.
There are a myriad of possibilities that could help this struggling economy if the guidelines were rewritten.
And since the other funding program (EIDL) was shut down to everyone but agricultural businesses last week and limited to $150,000 (not the $2 million originally promised), many businesses only got PPP and they can’t use much of it. And some businesses got more in PPP funds than EIDL. Many were counting on more money from EIDL (which has no restrictions) than PPP so they could use it on the things they really need to reopen or keep their doors open right now. But that just didn’t happen.
The other major benefit to changing the guidelines of the PPP funds is timing. And that is key! Many people already have this money in their accounts, and the banks seem to have hit a good stride on administering this now. If we have to sit around and wait for another round of funding (and uncertainty), it will cause more layoffs or lack of rehires and more businesses to close forever.
Of course, more guidelines could also be put in for unacceptable uses, too — no company yachts! But most responsible business owners are not trying to abuse this. They are just trying to keep their doors open and survive so they and their employees can thrive again and have long-term job security.
There are just so many ways this could stimulate the economy in positive ways.
Again, PPP was well intended but it just didn’t work. And having to use PPP by the current guidelines just doesn’t make sense if our overall goal is to get people back to work for more than 2.5 months. And isn’t that the goal?
Making these changes would help a lot of struggling businesses survive. Or at least have a fighting chance.
Congress, please act now.
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