Coronavirus PPP loans are running low as Congress evaluates new funds

Ryan German has kept 40 employees working at his restaurant, Caffe Gelato, in Newark, Delaware.

The Paycheck Protection Program provided a lifeline to help you through an unprecedented spring when the coronavirus pandemic swept the country. The loan, now exhausted, covered seven weeks of payroll. But the restaurant faces an unknown future with extended restrictions on operations and changes in consumer preferences.

“We need another injection of capital,” said German. “We are trying to keep all angles open, but we are facing many headwinds.”

The Italian restaurant is located near the University of Delaware and worked throughout the pandemic. He started a business to deliver food and home meal kits to clients’ homes. Its staff also began hiring outdoor services like pressure washing to keep everyone working, German said.

But uncertainty remains his biggest challenge, German said. The university has switched to remote learning and it is unclear when students will return to campus. The restaurant and wedding catering business is on hold.

“What is missed is the big parties. Big, busy, busy days in restaurants don’t exist,” German said. “While we can get 50% of sales on any given day, we are missing Mother’s Day, Easter brunch, and the University of Delaware graduation.”

Business owners like the German are anxiously waiting for the next round of stimulus to see what is done with the PPP. The program still has $ 131 billion in funds remaining through July 17, and companies that have not yet applied for a loan can do so until August 8.

A proposal by Senate Republicans revealed Monday that it set aside $ 190 billion for PPP loans. It also allows small businesses with fewer than 300 workers who have seen their income fall by more than 50% to apply for a second round of PPP aid, and authorizes $ 100 billion in loans to seasonal businesses and companies in sections of the low-income census. They can show an income reduction of more than 50%. Those areas have been disproportionately impacted by the Covid-19 crisis.

Recent data from the National Federation of Independent Business finds that the majority of surveyed members (71%) have now used their full PPP loan, with the remaining 29% not far away. Additionally, about a fifth of small business owners have or anticipate having to lay off employees after using the PPP loan, and almost half of borrowers anticipate that they will need additional financial support in the next 12 months.

In addition, about a quarter of respondents said they would have to close their doors if current economic conditions do not improve in the next six months, with an additional 22% reporting that they will not be able to operate for more than seven to 12 months under current economic conditions. More than half do not anticipate short-term problems, as they are better off financially.

The chair of the House of Representatives Small Business Committee, Nydia Velazquez (D-NY), said at a recent hearing on the PPP that some 110,000 small businesses have already closed permanently, with 7.5 million facing the same fate, which underscores the idea that the impact of the pandemic on business is far from over.

In a separate hearing, Treasury Secretary Steven Mnuchin advocated automatic forgiveness of the smaller loans, under $ 150,000, that made up the vast majority of loans made under PPP. The business community has been vocally supporting this idea in recent weeks.

Mnuchin also said he favors an income test, which is in the Republican Party’s proposal, something some advocates don’t favor.

The German, for example, would not pass a fall income test of more than 50% due to his creativity in operations, but he needs the support.

“If we have to paint houses or pressure wash or stain the roof or if we have to rake the leaves in the fall, in addition to serving food, that is what we are going to do, but we do not intend to put people outside”, said. “It’s just that even with all those different efforts, we need the help of the federal government. We need Congress to act. We need Congress to pass the second round of stimulus.”