PPP loan recipients face big decision on Monday

Businesses that have received emergency loans from the Small Business Administration’s Paycheck Protection Program (PPP) face a Monday deadline on whether they should keep the money and any restrictions on it. accompany.

The main concern for businesses is that the Treasury Department’s changing conditions for canceling loans could leave them dry. Others fear a backlash, from workers or the general public, for taking the loans in the first place.

The midnight deadline marks the point of no turning back for participants in a program plagued by confusion and allegations of favoritism on both sides of the aisle.

“This vital program has had a bumpy rollout. The decision to have the loans repaid by some large corporations was based on buyer’s remorse in Congress, ”said Paul Winfree, who heads the conservative Heritage Foundation’s economic policy.

Much of the public reaction came when large corporations took advantage of exclusions for the hotel and restaurant industries. Shake Shack was one of the best known cases. The fast food chain said it had received millions of dollars, at a time when thousands of small businesses could not access the loans, but said it would repay the funds amid criticism from Democrats and Republicans.

secretary of the treasury Steven mnuchinSteven Mnuchin Large Russian Hack Group Linked to Sinclair Ransomware Attack: The Hill’s Morning Report – Presented by Alibaba – Biden Engages in Frenzied Talks over Dem spending Former Treasury Secretaries Tried to Resolve Deadlock on debt limit in talks with McConnell, Yellen: MORE report later announced that loans over $ 2 million would be audited and could potentially face criminal liability if borrowers fail to adhere to the new, stricter guidelines. He gave businesses until Monday to return the loans without question before launching inquiries.

“Obviously, a lot of companies received loans that probably didn’t need them, and some of them specifically said so,” said Alexandra Thornton, director of tax policy for the Center for American Progress. from the left.

A New York Times Analysis found that state-owned companies had received nearly $ 1.5 billion in loans and nearly a third were repaid by Monday’s deadline.

“None of this was very well thought out when the legislative language was crafted,” said Winfree, who called the program “mess.”

Congress included $ 349 billion for the PPP in the $ 2.2 trillion CARES law that was enacted on March 27, in a bid to save small businesses devastated by the COVID-19 pandemic and associated lockdowns.

The idea was to offer forgivable loans to companies with less than 500 employees since they do not have the same access to capital as large companies. If a small business spent most of the money on payroll and the rest on basic costs like rent or utilities, the government would write off the loan, essentially turning it into a grant.

Lawmakers believed this approach would ensure that businesses used the money for the intended purposes, and hoped that leveraging the Small Business Administration and its existing network of financial lenders to disburse the loans would allow the program to grow quickly.

But the exclusions and difficulties obtaining loans have prompted accusations of favoritism, as the big banks first dealt with requests from existing customers.

In the early days of the program, major lenders were able to get up and running, and some, like Bank of America, explicitly said they would only serve existing customers.

Small businesses that had to wait for their community lenders to join them found it more difficult to access funds, if at all.

“I think the people who really aligned were people who had sophisticated tax advisers and had pre-existing relationships with the big banks,” Thornton said.

The funds were used up in less than two weeks. When the program was replenished with an additional $ 310 billion, Congress imposed new restrictions requiring that a large portion of the funds be distributed through smaller lenders, and Mnuchin instituted special hours during which only larger lenders. small could process loans.

The average loan amount has fallen by almost 50 percent.

Still, Thornton said, small businesses may have been repelled by taking on a new financial risk until the government decided, based on uncertain rules, to cancel the loan.

“The idea of ​​giving loans, not grants, to small businesses was probably not such a good idea,” she said. “The fact that they don’t know if the loans will be forgivable before the fact is a deciding factor. “

Others like Dallas Mavericks owner and former Shark Tank host Marc CubanMark CubanMark Cuban adamant on vaccinations: “If you work for me, I demand that my employees be vaccinated” “Shark Tank” investor Barbara Corcoran apologizes for comments on Whoopi Goldberg on “The View” The player NFL said he will get the shot if he can benefit from it MORE, argued that the program and its funding would simply not be enough to keep the economy afloat during the pandemic.

“It’s time to face the fact that the PPP didn’t work. Big plan, difficult execution. Nobody’s fault. The only thing that will save businesses is consumer demand. No amount of business loans will save them or save jobs if their customers don’t buy, ” Cuban tweeted on Monday.

Federal Reserve Chairman Jerome Powell highlighted the risk of a prolonged recession in a 60-minute interview broadcast on Sunday.

“There is a real risk that if people are unemployed for long periods of time their skills will atrophy a bit and they will lose contact with the workforce,” he said, saying that prolonged unemployment weighs on the economy.

But it has also seemed to carry its full weight behind programs like PPP.

“The good news is that we have policies that can help minimize these effects. And that’s keeping people and businesses out of insolvency for maybe three or six more months while health officials do. what they can do. We can buy time with that, “he said.

Key members of Congress rebuffed criticism of the PPP, saying it had achieved the primary goal of getting money for small businesses quickly.

“Any company that abused the program to gain eligibility should be held accountable,” Sen said. Marco rubioMarco Antonio RubioSenate Endorses Bill to Protect Telecommunications Infrastructure From Foreign Threats Hillicon Valley – TikTok and Snapchat Seek to Distance themselves from Facebook Rubio’s Calls for Federal Inquiry into Amazon Benefits PLUS (R-Fla.), Who helped develop P3 legislation as chairman of the Senate Committee on Small Business and Entrepreneurship.

“But neither can we allow legitimate scrutiny to become rampant hysteria,” he added.

While state-owned companies ended up getting PPP loans, they only made up 0.35% of its overall funds, Rubio said.

Even as the legislation passed, Rubio argued that it was better to act quickly and clean up the mess later than spend weeks crafting targeted legislation, creating new bureaucracies and adding red tape. .

“The main objective of this program was to prevent millions of Americans from being made redundant. And judging by these standards, the fact that by the time the second round of P3s is completed, nearly 50 million Americans will have jobs as a result of that makes the program a huge success, ”said Rubio.

Yet groups who have felt left out by the program say the government should ensure that funds returned by large companies end up in the hands of smaller ones.

“We want these dollars to be reinstated in [community-based financial institutions] who are friendly with the minority community, ”said Ron Busby, president of the US Black Chambers.

Mike Lillis contributed.

Comment here

placeholder="Your Comment">