The original law called for at least 75 percent of the loan money to be allocated to the payroll in order to be forgivable, but now companies can use up to 40% of loans for non-salary expenses, such as rent and utilities, while still being forgivable. Businesses and individual owners also have five years instead of two to repay loans.
“That almost makes it a grant,” said Jeffrey Levine, partner at accounting firm Newton Alkon & Levine.
Levine said that about half of his company’s 250 small business clients have applied for PPP loans and about 90 of them have been approved. Yet customers were concerned about the amount of the loan they might have to repay.
Current legislation gives more businesses the peace of mind that the money won’t turn into a big loan, even with a modest 1% interest rate.
“It frees them up and gives them a lot more flexibility,” Levine said.
The P3 is the federal government’s flagship program to help small businesses that have been forced to shut down to reduce the spread of COVID-19. It’s a $ 659 billion program that came with good intentions: giving employers free money if they can keep workers on their payroll or rehire those who have been made redundant.
The bank-administered program got off to a rough start in April, confusing both banks and loan seekers. Then the money ran out in two weeks, forcing Congress to quickly authorize more funding. According to the SBA, about 4.5 million loans have been approved for a total of about $ 510 billion. The average loan size was around $ 113,000.
Unless the PPP rules change, local restaurants that were lucky enough to get the money in the first round didn’t feel so lucky. Legal Sea Foods, for example, has closed 32 sites and put most of its 3,100 employees on leave, but the company has so far only spent about 20% of its loan, not knowing when it might. reopen for food service and rehire employees.
Legal CEO Roger Berkowitz called the original PPP terms “onerous” but says the current changes in Congress provide “a much needed respite.”
Justice will need it. Even though the state could give restaurants the green light to offer alfresco dining next week, Legal probably won’t open the sit-down service until July, as Berkowitz wants to make sure the virus is really under control.
“I am skeptical of the numbers going down,” he said. “I wait on the side of caution. Opening up and staying away from the occupation doesn’t make much sense.
Curt Carpenter, manager of Lekker Home in Boston, has also been reluctant to spend his PPP money – only about 30 percent so far. Last week, more Massachusetts retailers were allowed to open for curbside pickup, and he brought back three employees using his P3 loan. During the shutdown, Carpenter had to temporarily lay off half of its staff, or six, at its South End modern furniture and home decor store.
Carpenter predicts he won’t open his showroom until the end of June. He also expects it to be some time before income and staff levels return to pre-pandemic levels.
“It would be foolish for a retailer to think they are going to see pre-pandemic sales even a month or two or three months after opening,” Carpenter said. “I’m ready for a long journey back to where we were since the first quarter. “
The federal government had to change the terms of the PPP because it underestimated the fallout from a virus-induced shutdown. Instead of a two-month burst, the economy can take years to recover as consumers still aren’t comfortable venturing out. Maybe a vaccine can bring back a sense of normalcy, but that probably won’t be available for at least a year.
Changing the PPP will increase the chances of parent and pop companies surviving a pandemic – and now comes the hard part: waiting and seeing if that’s been done enough.
Shirley Leung is a business columnist. She can be reached at [email protected]