Widespread criticism of the Paycheck Protection Program (PPP) has Congress reportedly looking for fixes (and votes) that could happen this week.
House Speaker Nancy Pelosi has agreed to take up legislation that would grant more flexibility in how and when they use the loans and still have them qualify as forgivable, according to Politico.
As part of the CARES Act, PPP provided businesses with 500 or fewer employees the funds to pay up to eight weeks of payroll costs, including benefits. More specifically, they could be used for payroll costs, interest on mortgages, rent, and utilities. However, at least 75% of the forgiven amount must have been used for payroll.
The problem for many small businesses—and especially restaurants—is that state lockdown orders mean full operations have yet to materialize. With staff not back to full time and the eight week-deadline fast approaching, the funds have not been spent.
While the National Restaurant Association pushed for the period to be extended to 24 weeks, Treasury Secretary Steven Mnuchin said in a recent interview with The Hill that there was bipartisan support for expanding the timeline to 10-12 weeks.
Many small businesses have noted high rents and administrative overhead are limiting their ability to operate, and they seek to use a portion of payroll funds to ease the burden, something about which Mnuchin pushed back.
“It’s called the Paycheck Protection Program, it’s not called the overhead protection program,” he said.
Infrastructure issues
The program still has $100 billion in funding left, and the lack of sufficient infrastructure to quickly distribute the funds was noted at the program’s outset.
“They’re trying to push something like 10 times the annual volume through the SBA in a period of about two months,” Riskalyze CEO Aaron Klein said in early April as part of Fintech executive conference call with lawmakers.
“I think the SBA lends an average of about $35 billion a year and they’re now trying to push $350 billion in 60 days. It’s a massive undertaking,” Klein added.
Billionaire businessman and Dallas Mavericks owner Mark Cuban posted a five-part tweet last week that said in part, “It’s time to face the fact that PPP didn’t work. Great plan, difficult execution. No one’s fault. The only thing that will save businesses is consumer demand. No amount of loans to businesses will save them or jobs if their customers aren’t buying.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
