Fix PPP: Small Business Advocate Urges Practical Modifications and Improvements

By at 30 April, 2020, 10:11 am



Washington, D.C. – The Paycheck Protection Program (PPP) has served as a lifeline for many small businesses. However, at the same time, navigating the application process has been frustrating for many small businesses, as well as efforts to make the rules work once PPP monies have been received. More small businesses are hearing good news about getting approved for loans as time goes by, and the PPP loan size has been decreasing, which means smaller businesses are accessing the program. As the Small Business Administration (SBA) and U.S. Treasury make continuous improvements and implement steps to ensure Main Street businesses are largely benefitting from PPP, federal officials and Congress must update and make changes to the program to make it more effective and practical for small businesses, according to Small Business & Entrepreneurship Council (SBE Council) president & CEO Karen Kerrigan.

“Federal officials and Congress need to ensure the massive amount of PPP capital being deployed by the U.S. government is being put to its best use by small businesses.  That means making key changes in response to economic conditions on the ground and the diverse business models that drive the small business economy. Some provisions in PPP are already obsolete given the unexpected duration of business shut-down and stay-at-home orders, as well as the unprecedented blow to the economy that was largely unforeseen when PPP was drafted and enacted,” said Kerrigan.

Some of the modifications that need to be made are not the fault of PPP drafters, Kerrigan observed. However, she added:

“Modifying PPP right now will ensure that loan dollars are maximized and used to accomplish the intended purpose of the PPP – that is, salvaging jobs for the long term and saving as many small businesses as possible.”

Over the past month, SBE Council has been advocating for specific changes to PPP. These modifications must occur now, said Kerrigan, in order to allow small businesses to successfully on-ramp and plan as states begin to re-open their economies.

“There is no one-size-fits-all approach to state re-openings, and how local economies bounce back and consumers respond will vary greatly by region. That is why PPP rules need to be as flexible and pragmatic as possible,” said Kerrigan.

PPP fixes include:

Extending the June 30 “Covered Period”: It is not fault of PPP’s drafters that deadlines – in this case the June 30 covered period – was put into the legislation. The cascading economic effects of COVID-19, due to shut-down and stay-at-home orders, evolved daily and most believed that the virus and its effects would be “short-term.” The road to economic recovery will no doubt be longer and slower. Therefore, the covered period for the program, which ends on June 30, must be extended and ideally to December 31, 2020. Extending the deadline means small businesses will be able to on-ramp employees after June 30 (to be eligible for loan forgiveness) and at a pace that aligns with demand.

Provide Greater Flexibility in the 8-Week Window: Once PPP money hits the bank account of a small business, an 8-week shot clock for loan forgiveness begins. That means small businesses must bring employees back immediately after receiving their loan, even if weak business revenue during this period will not sustain this payroll and business for the longer term. This includes loan forgiveness for “covered expenses.” Congress must allow small businesses more flexibility for this loan forgiveness period, and extend the period to at least 24 weeks.

Change the Arbitrary 75-25 Rule: This rule, created and published by U.S. Treasury and SBA, caps non-payroll costs associated with PPP loans at 25% of total forgivable expenses. When published, it was an unexpected and very disappointing development to small business owners and the community at large. This one-size-fits-all ratio, which was not in the PPP legislation, is inappropriate for many types of Main Street businesses, micro-manufacturers, the self-employed, businesses in high-cost (high-rent) areas of the country and firms whose largest expenses are rent, utilities and other related essential costs of keeping these businesses open.  Loan forgiveness needs to be provided for all allowable payroll and non-payroll expenses during the 24-week window. There was no ratio placed on allowable forgivable expenses by Congress in the legislation, and the 75-25 rule must be lifted.

Expanding What is Forgivable in Non-Payroll Costs: There are other expenses incurred by small businesses outside of the list that have been deemed forgivable in the PPP legislation (rent, utilities, mortgage interest, etc.), and remain essential to small business operations.  A glaring omission, which has become even more essential now in the COVID-19 economy, is technology costs related to the digital operations of a small business. The use of digital platforms, business software and cloud services has only ramped up for small businesses in order to enable work-from-home arrangements, supporting or shifting to e-commerce operations to drive revenues in order to survive, processing payroll and more. These related expenses, and software leasing and licensing costs, make sense to include as essential expenses, therefore forgivable.

SBE Council’s COVID-19 Small Business Resource Center


Karen Kerrigan, SBE Council president & CEO

SBE Council is nonpartisan advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For 25 years, SBE Council has worked on and advanced a range of private sector and public policy initiatives to strengthen the ecosystem for strong startup activity and small business growth. Visit @SBECouncil

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