Coronavirus Small Business Relief, PPP, and What Businesses Still Need

As of May 28, 2021, the Paycheck Protection Program has run out of funding. You can learn more about the PPP with our COVID-19 resource hub.

The paycheck protection program has stemmed the tide of the threat to small businesses caused by the COVID-19 Pandemic. However, lack of clear rules and competing interpretations of those rules has many small business owners concerned about whether their new loans will be forgiven, and if not, then what. These, and more findings, come according to polls conducted by Biz2Credit with over four thousand small business owners between April 28 and June 30, 2020.

COVID-19 and Cares Act Relief: How small businesses have coped with coronavirus

Small businesses across America have been tested by the economic and public health challenges caused by the COVID-19 Pandemic since March, when social distancing measures were rolled out. Beginning in April, Biz2Credit has held informational webinars to help small businesses grasp the tools they need to outlast the novel coronavirus. Senator Susan Collins joined the most recent forum, Paycheck Protection Program – A Retrospective and the Path Forward, which was recorded on June 30, the original deadline to apply for PPP loans. Susan Collins is the Republican Senator from Maine and a coauthor of the Coronavirus Aid, Relief and Economic Security (CARES) Act Paycheck Protection Program (PPP). The forums hosted experts from Biz2Credit, Paychex, Inc. and CPA.com. They also asked that attendees participate in small business research surveys. Here is how small business owners have made it through the COVID-19 pandemic and what they need next.

What business owners have been experiencing

Biz2credit originally organized the online forum to educate small business owners about the PPP and other government coronavirus response relief options and answer their questions about what’s next when it comes to economic relief and economic development support related to the ongoing health crisis. The reality: We learned just as much from the business owners who participated in the forum as they learned from us. As part of the forum, Biz2Credit surveyed and solicited questions from the more than one thousand small business owners who took part in it. Biz2Credit was able to compare this information with data from surveys that were conducted earlier in the year. The key thing that we found out is that 79.5 percent of business owners had a positive outlook on their finances and economic security as they entered 2020. By the middle of April of this year, just about four months later, 83.7 percent of those surveyed believed they needed outside assistance to make ends meet through the end of the year. The first step toward providing that aid came through the PPP. Specifically, business owners at the start of the year felt almost universally positive. According to data from polls taken during March and into April of 2020, business owners reported that on January 1, 2020, prior to the pandemic, they were feeling:

• Very positive: 40.62 percent
• Pretty good: 38.87 percent
• Neutral: 12.56 percent
• Not so good: 5.45 percent
• Very worried: 2.49 percent.

In March and April, things changed. Data from polls taken at the time showed business owners were NOT feeling as good about things as the pandemic took hold and forced business closures and work at home orders were put into effect:

• Very positive: 1.80 percent
• Pretty good: 8.08 percent
• Neutral: 18.79 percent
• Not so good: 35.82 percent
• Very worried: 35.52 percent.

Almost eight out of ten owners had positive feelings about their businesses at the beginning of the year. In March and April, more than seven out of ten were feeling pessimistic about things because of the advancing public health crisis. Back in March and April, the business owners we polled were starting to feel that they would need outside funding to keep their businesses running through the pandemic. When we asked how long they could continue to operate without support, the answers were:

• Less than five days: 7.49 percent
• A few weeks: 36.02 percent
• A few months: 40.16 percent
• Six to 12 months: 12.88 percent
• Don’t need outside funding for at least a year: 3.46 percent.

Based on those numbers, more than four out of five businesses needed immediate help and more than nine out of ten would need support within a year. That was one of the reasons Congress passed the then-record CARES Act quickly. It made PPP loan funds available to business owners when they needed them most. During the March and April timeframe, business owners reported that their biggest concerns were:

• Not being able to pay employees: 46.35 percent
• Dealing with outstanding accounts payable and business debts: 30.02 percent
• Not being able to take a salary: 10.33 percent
• Losing their business location: 4.25 percent.

Note: Some of those polled were not able to provide an answer, so the responses to this question does not total to 100 percent. When business owners who participated in our recent forum were asked how long they could operate their businesses without a second round of government disaster assistance funding, here’s how they responded:

• Two weeks or less: five percent
• Two weeks to one month: ten percent
• One to three months: 27 percent
• Three to six months: 23 percent
• Businesses that need no additional funding: 35 percent.

The numbers have improved since the earliest days of the public health crisis, but things are still serious for most small business owners. At this point, almost two out of three of them will need additional relief to make it through the end of the year. For business owners, even during the earliest days of the pandemic, their top concern was the welfare of their employees. Those owners especially when compared with being able to pay themselves. In addition, based on questions asked by business owners prior to the online forum, here are some of the other issues that are keeping them up at night.

Small business financial concerns

• PPP loan funds are inadequate to keep their businesses running over the long term. Whether small business owners will be able to apply for a second round of PPP funding is an open question. The HEROES Act, if passed by congress and signed into law by President Trump, could provide additional relief. In the original version of the act passed by the House of Representatives in May, funding for the PPP would be increased by $659 billion and an additional $10 billion would be added to the SBA’s Economic Injury Disaster Loan (EIDL) program. It also expands financial assistance to nonprofit organizations. Stay on top of the news to monitor the progress of passing and implementing the HEROES Act and other government funding programs.

PPP loan applications

• Business owners are not clear on whether it’s still possible to apply for PPP loans. The answer is yes. The deadline for applications has been extended through August 2020. Loans will be available as long as there are relief fund dollars left to make them. Biz2Credit is accepting PPP loan applications.

Qualification for PPP loans

• Sole proprietors, independent contractors and other single-person business owners aren’t clear if they qualify for PPP financing. They can apply for PPP loans. In many cases, the forgiveness requirements for these types of businesses are simpler than those for larger organizations.

PPP loan forgiveness

• Business owners aren’t sure what the deadline is for PPP loan forgiveness. The PPP Flexibility Act extended the forgiveness period (the time during which PPP loan dollars must be spent as required by the program and not have to be paid back so they become completely forgivable loans) from eight weeks after the date of loan origination (the date loan funds are received) to the earlier of 24 weeks after the date of loan origination or December 31, 2020. If business owners prefer, they can choose the eight week loan forgiveness period as defined in the original Paycheck Protection Program in the CARES Act. Work with your loan provider to determine the loan forgiveness period that’s right for your personal situation.
• Borrowers have questions about the PPP loan forgiveness application process.The PPPFA and recent actions by the SBA have made the process much simpler. Loan providers are able to help business owners who have received PPP loans through them to complete loan forgiveness applications.
• Business owners aren’t sure when employees need to be back on the books to qualify for PPP loan forgiveness. Under the original CARES Act legislation, businesses had until June 30, 2020 to restore their full time employee (FTE) headcount and salary levels to what they were on February 15, 2020. The PPPFA extends this deadline to December 31, 2020. The PPPFA also provides two exceptions for rehiring employees. The first is if a small business owner who borrowed money through the PPP can’t find qualified employees to fill open positions after making reasonable good faith efforts. The second is if the borrower cannot restore business activity to February 15, 2020 levels because of social distancing, sanitation or customer safety requirements established between March 1, 2020, and ending December 31, 2020 by The Secretary of Health and Human Services, The Director of the Centers for Disease Control and Prevention (CDC) or The Occupational Safety and Health Administration (OSHA). These changes are the result of delayed business reopenings and the continuing — and expanding — health crisis in many parts of the country.
• Many owners are worried about whether PPP loans will actually be forgiven. The original PPP legislation required that 75 percent of the coronavirus aid loan dollars be spent on payroll costs, including retirement plan contributions, sick leave pay and health care insurance premiums. The PPPFA now requires that only 60 percent of forgivable expenses be used for payroll costs, leaving 40 percent for non-payroll expenses. In addition to this, recent rulings by the Small Business Administration have eased other requirements for loan forgiveness, making it much more likely that loans will be forgiven. Contact your loan provider if you have concerns about whether your loan will be forgiven. Another option is tocheck out the SBA’s FAQs about PPP loans on the SBA.gov website. You can also check the PPP webpages of the U.S. Chamber of Commerce, your local chamber of commerce or your regional small business development center. A google search on COVID-19 resources also provides a wealth of business resources about this topic from many reputable websites.
• Business owners are not clear about what happens to Paycheck Protection Program loan dollars that aren’t forgiven. Essentially, the remaining, unforgiven dollars are converted into low interest loans with a one percent interest rate. The maturity term for the loans is five years. (The PPPFA extended this from two years in the original Paycheck Protection Program legislation.) Borrowers don’t have to make payments, including principle, fees and interest, for up to ten months after the covered period ends. (This was extended from six months in the PPP act.) There are no penalties for loan prepayment. Contact the financial institution that provided your loan if you have questions about PPP loan terms.

Service on PPP loans

• Many owners are unable to get help with their loan applications and other aspects of the program. While some of these issues can be traced back to the Small Business Administration, the federal agency that runs the PPP, much of it is because the financial institutions business owners are applying through are not adequately informed about the program. You owe it to your self to work with a small business loan expert like Biz2Credit.

Issues related to other types of government programs

• Businesses have concerns about whether they can have both PPP loans and SBA Economic Injury Disaster Loans (EIDLs). It is possible to have both types of loans related to the coronavirus disaster. There are rules, including the important requirement that businesses can’t use money from both loans to cover the same expenses. Business owners should check with their loan providers to find out whether it makes sense for them to apply for EIDLs, PPP loans, SBA express bridge loans, microloans, small business grants, money from a community foundation and other types of government stimulus and how to do so in a legal and compliant way.

The COVID-19 pandemic will continue to impact small business owners in the weeks and months ahead. Biz2Credit is committed to providing the latest information and insights on the topic.