The deadline for applying for Paycheck Protection Program loans is coming next Tuesday (June 30) following the PPP's long and eventful run, which were only available in early April. With less than seven days to go before the deadline, there's still reportedly a lot more than $100 billion left in unawarded funds despite concerns in early stages the $669 billion program wasn't big enough to satisfy the needs of U.S. businesses.
What happens now remains a subject of dialogue, as $100 billion is a large sum for small , medium-sized businesses (SMBs) to leave on the table. That's particularly so considering that a majority of SMB owners PYMNTS surveyed (58.2 percent) told us early on within the pandemic that they weren't sure their businesses would survive. And according to recent data from the group Small company for America's Future, 12 percent of U.S SMBs are currently facing bankruptcy.
Top Democrats and Republicans on the U.S. Senate's Small Business and Entrepreneurship Committee have suggested while using remaining funds for any second phase of targeted relief for SMBs. But would that be anymore successful in getting small businesses to simply accept the funds than the first round ultimately proved to be?
That could rely on if your second round proceeds less dramatically that the first round ultimately did, as PPP's beginning were far from smooth. The massive rush to apply for the program's forgivable loans exposed various technological hiccups and lack of clarity all around the program's rules.
Planters First Bancorp CEO Dan Speight told Karen Webster in an early conversation about PPP that such concerns slowed banks from \”pressing the send button\” on the money. But as soon as those issues appeared to clean up, this program ran out of money. The $349 billion in aid that Congress originally approved was all used up in under two weeks.
Congress quickly added another $320 billion and slightly changed the guidelines after reports emerged of fairly large, well-capitalized companies like Shake Shack and also the Los Angeles Lakers qualifying for funds. That brought a public backlash that led to the U.S. Treasury issuing new program guidelines – and a warning.
Authorities announced that firms that received more than $2 million in PPP funds could be audited. The rules further stated that if that audit found a firm didn't demonstrate it really needed the loan and potentially had use of other capital, penalties could include possible incarceration for executives.
Ingo Money CEO Drew Edwards later told Karen Webster that such a move might have a chilling impact on firms like his, which in fact had received a PPP loan but were seeking to hand the cash to avoid trouble. He said that while Ingo Money hadn't done anything wrong, it couldn't as a financial services tech firm even risk the possibility of a criminal investigation.
\”Our ability to sign the next contract with the next top five banks just torpedoes so long as an investigation is going on,\” he said. \”It's the kiss of death when the federal government's investigating you for potential wrongdoing.\”
The original requirement of spending at least 75 percent of funds on payroll within eight weeks to be eligible for a loan forgiveness also chilled business enthusiasm for that program. For businesses like restaurants shut down by the pandemic, it didn't make economic sense to create workers to a job they couldn't do when they'd fare better staying safe at home collecting unemployment.
By May, Congress and President Mr . trump had changed the guidelines to require businesses to use only 60 percent of the cash on payroll over 24 weeks to qualify for loan forgiveness.
But the chilling effect had already taken hold, and what to do with the rest of the funds is now a wide open question.
Aside from using the money for any second phase of SMB relief, an invoice from Democratic Sens. Chris Coons of Delaware and Jeanne Shaheen of New Hampshire would extend the applying deadline to Dec. 31 or later. It would also produce a new choice for a second loan going to borrowers that have less than 100 employees and also have lost the vast majority of the revenue due to the pandemic.
Other proposals demand turning the leftover funds into direct subsidies for businesses. But what's going to ultimately happen continues to be under discussion.
However, it's just as one increasingly bipartisan reason for agreement that something needs to happen, because a large amount of SMBs need funds to stay alive. The challenge now is making sure that cash connect correctly with them.
2 comments