Across the entire country, more than 4 million small businesses applied for funding from the federal government in an effort to keep their doors open. Our company was one of the 4 million.
If you’ve followed the exacerbating news coverage about the Paycheck Protection Program, you’ve likely heard good and bad stories about the effectiveness of the “stimulus” program designed to keep people out of unemployment and small businesses from losing a lifetime of hard work.
In today’s edition of The Leader, writer Betsy Denson has talked to small businesses and a local banker about the job-saving program; I’d like to give you an inside glimpse from someone who spent many sleepless nights hoping for loan approval.
As of this writing, our company has not received funding. However, we were approved, which means our local bankers at Allegiance (wonderful people, mind you) have promised the check’s in the virtual mail.
Rather than take you through the painstaking process of the loan application, the gravity of approval, or the specifics of the program, I thought it might be interesting to offer an opinion on the highlights and lowlights of this program. Who knows, maybe a Senator or U.S. Representative will catch wind.
You won’t find a business in the country complaining about getting enough money to cover payroll, rent and utilities for a couple of months. We certainly won’t be the first.
Receiving enough of a forgivable loan to pay our employees ranks at the top of the positive list from this program. Without that funding, it’s likely our business would have lost another half of our staff (we had to let one group go in early March, and that was excruciating).
This funding also helps us provide medical benefits to our employees, and at times like these, that benefit is as valuable as any other.
On top of keeping the people we have, this funding allows us (actually, it mandates us) to hire back a certain number of people. We have made plans to hire new positions to our company in hopes they help us pivot into a new business model. Many of the people we’ll hire had been laid off from other companies, so in a grand sense, the PPP money is being used exactly as it was intended: To help pull people out of unemployment.
Two other benefits of this loan: First, it gives us a two-month window to develop a plan to save our company. There are no secrets about the struggles of print media, and we’re doing our level best to create a business that can survive and thrive in the months and years to come.
Second, for any amount of the loan not used for payroll, rent and utilities, we’re only required to pay 1 percent interest on the loan.
Now, if you want to know the problems of this PPP loan, just go back and read all the things that are good.
For starters, this money allows us to retain current employees and hire new people, but the money must be spent over the next eight weeks. So what happens at the end of eight weeks? Is there a sane soul who believes the economy will have recovered and people will be milling about the streets and stores swiping credit cards?
No chance. The recovery from this pandemic – economically and emotionally – will take months and years. And at the end of the day, the 4 million small businesses that needed funding will be back in the same spot.
We may slow, even reverse, the unemployment trends, but it’s kind of like being told we got a new drug that means we won’t die next week. Instead, we have eight weeks to find a new cure. And to be blunt, the only cure for most small businesses is a stable and growing economy, which few can see around the corner.
That’s not a gripe with the leaders of our government. They had one week to figure something out, and they’ve extended our runway by two months, of which we all appreciate. Those of us with mettle and an entrepreneurial spirit will dig and claw to figure a way through this travesty.
Meanwhile, we’ve got another concern about the PPP, and the answers we get are different no matter who we ask.
The great part of this program is that the loan is forgivable. The terrible part of this program is that no one clearly knows what is required for forgiveness. Some say the loan is forgiven if you spend 75 percent of the funds on payroll, up to $100,000 per position. Others say, “No, you must also hire back as many people as you had before the virus struck.”
Those are two drastically different requirements, and without boring you with details, the reality is no one actually knows the answer. Instead, to quote one CPA, “We expect to get guidance from the SBA in the next month.”
Think about that: Small businesses have been given a chunk of money with which to survive. We’ve been told we have to spend the money a certain way, but the government hasn’t yet given the specifics of how we’re to spend it.
Here’s where it gets tricky: From the moment our loan is funded, the clock starts on the eight-week window for spending the money. But there’s a very good chance we won’t know how to have the loan forgiven until we’re halfway through the spending period.
That’s like your dad giving you $10 with the stipulation that you don’t have to pay him back if you spend the $10 on the right thing over the next day. When you ask him what “the right thing” is, he says, “I don’t know yet. I’ll tell you next week.” Oh, and he’s going to take some interest if you don’t spend it on the right thing.
The government helped every small business possible through this loan, and more help is on the way for those still waiting. But they erred in trying to call this a loan; it always should have been a grant.
At the end, there will be 3 million businesses that get funding, and many of them will be stuck holding a loan with a bad economy, few employees and no funds to pay it back.
I presume there’s another act to follow.