The Paycheck Protection Program Is Funded Again But Don’t Get Your Hopes Up

The Paycheck Protection Program returns this week, but it remains to be seen whether the program will be considered a net plus to small business or a big minus, like the original rollout. 

There are a few positive signs this time around. Large companies have been forbidden or discouraged from taking money from the program. Large concerns like Ruth’s Chris Steakhouse, Shake Shack, and Harvard University, who received millions in the first go-round, either returned the funds or publicly earmarked them for worthy causes.

The Small Business Administration, which oversees the program, has pointed to a variety of metrics as proof of success in the first iteration of the program, which ran out of funds on April 16. U.S. Small Business Administrator Jovita Carranza and U.S. Treasury Secretary Steven T. Mnuchin put out a statement to coincide with the resumption of funding: “The PPP has supported more than 1.66 million small businesses and protected over 30 million jobs for hardworking Americans. With the additional funds appropriated by Congress, tens of millions of additional workers will benefit from this critical relief.

“We encourage all approved lenders to process loan applications previously submitted by eligible borrowers and disburse funds expeditiously. All eligible borrowers who need these funds should work with an approved lender to apply. Borrowers should carefully review PPP regulations and guidance and the certifications required to obtain a loan.”

But critics point to the limitations of the program as evidence that it has been a failure. With only 1.6 million of the more than 30 million small businesses in America served, about 5% of the total, the selection process has smacked of capriciousness at best, cronyism at worst. Small-business advocates like CEO Dan Price of Gravity Payments, a Seattle-based payment processing firm that serves mostly small business, have been withering in their criticism:

The next round of funding in the most recent congressional bill contains $321 billion, slightly less than the $349 billion total in round one. Even if the program serves as many businesses as the original, despite the lesser funding, nearly 90% of small businesses would remain unfunded by the PPP. While some of those businesses may still be functioning profitably during the coronavirus pandemic, many, undoubtedly will not.

The reality may be that the PPP was never conceived as a program to bail out all needy small businesses—just enough to take some of the pressure off the state and federal unemployment system. After all, every worker who can receive funds from their previous job is a worker who doesn’t enter the system, at least for a while. 

Questions about the program remain. How does the business track the portion of funds that may be forgivable? The program states that funds that are used for employee salaries, rent, benefits, and utilities will be forgivable, but who tracks the usage of the funds? How do businesses in states with mandatory stay-at-home orders use the funds when their business, such a gym or a restaurant, can’t function fully staffed with the current limitations? What happens when the 8 weeks of funding runs out?

The question of what if an employee makes more money on the expanded unemployment benefits which include a $600 per week augmentation from the CARES act was answered definitively by Washington Employment Security Department attorney Scott Michael in a recent press conference: “The employee must return to work at their old salary, even if it is less than unemployment, if they filed for unemployment on ‘standby’ and their old job is offered to them.” This is exactly the scenario that some lawmakers were concerned about when the CARES Act was proposed.

During this unprecedented time of upheaval, workers and businesses would do well to view the forest instead of the trees. We appear to be in the “helicopter money” stage of financial aid during an economic freefall. Who gets the money and how they get it is unwieldy and inconsistent on a micro level, but crucial on a macro level. If PPP doesn’t work for you and your business, apply for the expanded unemployment. New rules allow the self-employed and gig workers to apply. Make sure you apply for the forgivable EIDL disaster grant. Consider a low-interest EIDL loan.

This is the time to throw every government and private relief program against the wall and grab whatever sticks. Right now, for small business, the focus should be on the Paycheck Protection Program. But when it runs out of money in a hurry again, move on to the next opportunity. Small business has been inundated by an economic flood. The important thing now is to stay afloat and keep your head above water, by any means necessary.