The paycheck protection program emerged as an early success of the government’s pandemic relief effort, but it ended in a scuffle and left billions of dollars unallocated when small businesses were spooked by the ever-changing rules.
Even as Democrats and Republicans fight over other aspects of another major incentive bill, they have largely agreed on how to revamp the PPP to restore its popularity and usefulness.
But groups representing the smallest business owners – independent contractors, the self-employed and minority companies, who complained that they were largely excluded from previous rounds of financing and for whom these changes were intended are to help – already ask if it will be enough.
For starters, they note that both the old and the proposed new PPPs are implemented by the Small Business Administration, which works with companies with as many as 500 workers, has less experience with companies with less than 100, and almost none with those with one as a handful of employees.
Most of America’s small businesses have less than 20 employees, but they have not received most of the former PPP money and are not sure they will do better under a revised program still being implemented by the SBA, say lawyers.
“The vast majority of business owners who need and want PPP are not the typical small business SBA debtors,” said Katie Vlietstra, vice president of the National Assn. for the self-employed.
For small businesses that have already obtained one of the forgivable PPP loans, there is some good news about a possible release of PPP: They may be able to get a second loan, which is not allowed in the original rules. That could be a salvation for companies that burned through the first 24 weeks of payment support.
“The expectation, I think, when this was done months ago was that we would now be out of the crisis,” said Alfredo Ortiz, chairman of Job Creators Network, a small business advocacy group. “These small business owners just have cash on hand.”
In total, more than 5.1 million companies received PPP funds before loans ended August 8th. The government says 51 million jobs were saved. S&P Global estimates that it is closer to 13.6 million.
When the program began, $ 349 billion flowed out the door in less than two weeks. But the early successes were soon replaced by shame and confusion. The public was frustrated to hear of large publicly traded companies such as Potbelly or Shake Shack receiving loans.
Commercial banks tasked with distributing the money gave priority to their existing customers, causing small businesses without a strong banking relationship to scramble to compile the necessary application paper as the money flowed to larger companies.
Meanwhile, rules for ordering the money changed weekly, sometimes days at a time, and doubted what conditions companies had to meet in order to repay the loans. The question plumped. Even an expansion of the program in June was not enough to renew interest. While more small loans were processed in the second round than in the first, more than $ 126 billion was left on the table when the program ended.
‘The people who have not applied for it are either not affected, they do not think they will get it, or they think that if they get it, they are on the hook for it. And I think a lot of them probably left their employees, “said Cathie Mahon, president of Inclusiv, a national organization that represents lenders in low-income communities.
She said the renovation should provide clarity for companies on exactly what they need to do to ensure the loan is repaid before they start lending, she said.
“You just can’t make decisions about maybe, maybe not,” Mahon said.
Republicans and Democrats agree that the program should focus on smaller businesses, and very small businesses and minority businesses should give priority.
“I think we have a pretty good package, and I worked hard on it with Sen. [Benjamin L.] Cardin ”(D-Md.), Said Marco Rubio (R-Fla.) Chairman of the First Chamber of the Small Business and Entrepreneurship Committee. “I’m not saying he’s signed up for our package, but that reflects a lot of our common priorities and we’re pretty close.”
Republicans want to target companies with fewer than 300 employees who have seen sales increase by 35% or more, and raise $ 10 billion for communities and rural banks to borrow. Democrats want to focus on those with less than 100 employees who have increased sales by 50% or more. Both want to set themselves up to $ 25 billion for companies with less than 10 employees.
Republicans want to set up a new government-backed lending program through private banks. Democrats say the existing program for economic disaster relief lending, which is directly a government loan to small businesses, could be adapted to do so. Republicans say 60% of new loans should be spent on payday loans. Democrats do not specify in their bill. Both want to make it easier to apply and get the forgiveness of loans.
“I do not think we need a lot of time to resolve our differences, and our staff work very closely together,” said Cardin, the highest-ranking Democrat on the committee.
Following the failure of loans under the previous PPP rules, some small businesses, especially those with less than 10 employees, may have to convince themselves that they have a shot at the money when they apply, Ortiz said.
“I think there should be some marketing going on on this,” Ortiz said. “People now have a little breath that needs to be overcome.”
For the nation’s smallest businesses – many of which are black-owned and have no employees – even the changes proposed by Congress may not be enough, said Ron Busby Sr., president of the US Black Chambers.
An estimated 41% of black-owned businesses have been permanently closed since the pandemic began, he said. But Congress has a chance to learn from the mistakes in the first round they made. He advised offering subsidies, non-repayable loans, and distributing the money through lenders targeting low-income communities, black-owned banks and credit unions.
“There needs to be stricter control over who gets the funds and how the funds will be used,” Busby said. “[Local lenders] know how to get to the companies that need the funds. ”
Pur-Patel, Purvi Patel, said Self-Help Federal Credit Union in Oakland used its existing relationships with community-oriented economic development groups to help companies that did not get a loan and needed a little more help filling out their PPP applications over the summer. special project manager.
“Some of this game feels overwhelming, especially for a small nonprofit in the Central Valley with three or four employees like a nonprofit nonprofit in LA,” Patel said.
Jase Rex, 51, chief executive of Hot Section Technologies, a federally certified aircraft repair station, worked with an economic development group and his local bank to raise $ 180,000 in early May that allowed him to pay his 18 employees.
But he said he would not qualify for a second loan if he had to show a 50% drop in sales.
“We are experiencing a slow arrival,” he said.
For Carlos Ortez, 58, owner of Un Solo Sol in Los Angeles, PPPs demand that 60% of the loan be used for payment transactions the other bills that must be paid are considered to keep his restaurant open. For him, bills like insurance and utilities could be as much as pay, and while he’s thankful that the $ 23,700 loan he received in June could pay off two of his four employees, he wants to see more flexibility.
“If we do not pay the bills, we will eventually come out,” Ortez said.
