The Payroll Protection Plan, Lifeline Or Noose?

The Payroll Protection Plan (PPP) is a loan program that was created from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The program has good intentions in trying to help businesses, but it’s just not a viable concept. I think that the PPP should be relabeled the “Potential Problem Plan” because it’s going to put people in debt.

Typically I would say to folks, when you sign up for a deal, that’s it that is what you signed up for, so stop complaining. But when it comes to the PPP, I’ve noticed that many of the rules have evolved for businesses, and need to be examined further.

Many businesses have already received the PPP help, and are probably 4 weeks into it already. They still have another 4 weeks left to fund, and even with states re-opening up some businesses, it’s just not enough time to get them through.

Here’s an overview of what’s wrong with the plan, and some alternatives on how the Federal government should reconsider their PPP.

The current PPP (Potential Problem Plan)

• 8-week bridge loan
• Grant calculation seems to be fluid
• Original terms have changed
• 24-month term out at 1%

 Funding for your business

We are two weeks into round 2 of PPP funding, and federal money has not been 100% allocated. I believe it is due to fluid terms, uncertainty, and the fear of added debt.

The current plan is not practical for the ‘real world’. Independent businesses do not ebb and flow in 8-week cycles. Retailers, contractors, and manufacturers have a selling cycle that can be 3-6-12 months or more.

If the purpose of the original PPP was to keep folks temporarily off unemployment, it did not work. Some folks are better off with receiving the federal $600 subsidy.

*If the loan is not converted to a grant; and forgiven, then the net result is added debt to a struggling business.

Changing the “Potential Problem Program” scenario into a reasonable “Payroll Protection Program”

• Triple the dollar amount funded, and increase the use of funds to 26 weeks
• Designate 100% grant for payroll; not to exceed 100k annually
• The amount of money NOT converted to a grant becomes a 48-month loan at 2% interest, which is guaranteed by the Federal government
• Get rid of formulas & headcounts
• No private companies that have revenues over $5oo million can apply
• No public companies can apply

Sometimes the government can make things a little more complicated than they need to be. A “one-size-fits-all” mentality doesn’t always work, especially in the business world. They need to take into consideration that business owners all have unique situations. The only constant variables are time & need for liquidity.

If you haven’t downloaded it yet, we put together a coronavirus relief resource document with information on CARES and SBA offerings for small business owners. We also set up a crisis hotline, running 24 hours a day.

If you need management advice, call 855-876-5561, and a live person will answer the call.   

As I mentioned before, it’s free!  

Stay safe, folks!