Is the Payroll Protection Program, or PPP, a mess, we at The Advocate can tell you first hand, yes it is – and we’re only beginning the process. For instance, we’re seeing that not all lenders understand the formula to decide the loan amounts, for instance sending paperwork with a formula of two times monthly payroll, rather than times 2.5.
Also, as written, the PPP incentivizes unemployment for contractors. For instance, the current PPP does not assist businesses that are working to keep their contractors going, because contractor pay is not considered when a business applies for PPP – however, the same contractor can now get unemployment benefits. There are also problems throughout the country as some financial institutions are favoring their largest customers.
Arguably, businesses can still apply for an EIDL loan to keep their contractors going, and most probably will, but the terms are not as favorable for smaller businesses – and it does add a layer of work at a time of multiple economic stressors.
Senator Merkley is demanding changes, now: Oregon’s U.S. Senator Jeff Merkley has pressed the U.S. Small Business Administration (SBA) to immediately fix a number of specific problems that have emerged in its botched implementation of the Paycheck Protection Program (PPP), designed to help small businesses stay afloat and keep employees on payroll. Merkley also separately urged Senate leaders to require the changes before adding more money to the program.
Merkley expressed alarm that PPP funding was not reaching the small, Main Street businesses, especially minority-owned firms, that Congress intended. The $349 billion forgivable loan program, which was included in Congress’ most recent coronavirus relief legislation, is designed to provide much-needed relief to American businesses dealing with the severe economic impacts of the pandemic. But Merkley has spoken with small business leaders across Oregon who say they are encountering significant hurdles.
“While I agree that we must continue to support this program through an increase of additional funds, we cannot do so in good conscience without addressing many of the issues that we’ve seen thus far,” Senator Merkley wrote. “The shortcomings in the current implementation of PPP are all too evident. We have an opportunity to correct these shortcomings, and we must seize that opportunity.”
Specifically, the Senator’s letter raised concerns that banks are prioritizing bigger, more lucrative customers for priority access to the PPP program; expressed the serious need for a clarification from the Small Business Administration (SBA) that community hospitals are eligible for the loans; and emphasized that exclusionary provisions preventing formerly incarcerated businesses owners from receiving benefits must be addressed.
In addition, the Senator recommended that the SBA clarify that local chambers of commerce that provide services to small businesses and business cooperatives with fewer than 500 employees are eligible for PPP loans; that the SBA and Department of Treasury provide clear guidance for banks and credit unions who are expected to make loans; that small businesses that employ independent contractors should be allowed to apply those contracts to their monthly payroll totals; and that the SBA clarify that all applicants can benefit from these funds retroactively.
Merkley, along with two colleagues, proposed a similar small business rescue program ahead of the last coronavirus relief program that created PPP. Throughout the coronavirus pandemic, Senator Merkley has been in regular contact with small business owners, workers, trade organizations, and unions throughout Oregon—and has fought to make sure their well-being and survival are not sacrificed to the industries with deep pockets and big lobbying budgets.
Dear Secretary Mnuchin and Administrator Carranza,
I have been hearing from small business owners across Oregon who have been hurt and frustrated by the problems surrounding the implementation of the Paycheck Protection Program (PPP) of the CARES Act. While I agree that we must continue to support this program through an increase of additional funds, we cannot do so in good conscience without addressing many of the issues that we’ve seen thus far. As we move forward with the PPP, I call on your agencies to address the following issues:
(1) Banks have been prioritizing bigger, more lucrative customers for priority access to the program, which was not the intent of this program. A portion of the funding should be set aside for Community Development Financial Institutions (CDFI); for businesses with fewer than 10 employees; for businesses with fewer than 50 employees; and for sole proprietors and independent contractors to ensure that smaller organizations are not being overlooked by banks.
(2) The Small Business Administration (SBA) must clarify that small, community hospitals with 501(c)(3) status are eligible for PPP loans. As non-profit district hospitals they adhere to federal and state requirements for all not-for-profit hospitals, including providing community benefit and charity care.
(3) The SBA has deemed ineligible any applicant if “[a]n owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years[.]” The breadth of this provision is unconscionable, as it punishes individuals who should be innocent until proven guilty and those who have already served their time and, due to the well-known racial disparities in our justice system, disproportionately disqualifies minority-owned businesses.
(4) The SBA should clarify that business cooperatives under 500 employees are eligible for PPP loans.
(5) Small businesses that employ independent contractors should be allowed to apply those contracts to their monthly payroll totals, providing them support to keep these contracts active. In that correction, the SBA must clarify that these independent contractors, should they hold multiple contracts, would not be eligible to then apply for PPP for that contract, but could apply to compensate for the loss of other contracts.
(6) The SBA and Department of Treasury must provide support for lenders as well, providing authorization details, details for note, and details on the secondary market, so banks engaged in lending understand expectations from regulators.
(7) Lastly, the SBA must clarify that all applicants can benefit from these funds retroactively, even if their loan processing takes longer than the eight weeks designated by the SBA.
The shortcomings in the current implementation of PPP are all too evident. We have an opportunity to correct these shortcomings, and we must seize that opportunity.