The Independent View: The Payroll Protection Program is not a Small Business Loan it is Just Another Form of Unemployment

My Son has a Toy and Sports Memorabilia Store and On-Line Business, and a Silent Auction Business for Charity Events, in New York, that covers the Tri-State area.

This is his thoughts on what is happening to Small Businesses with the Covid-19 Pandemic.

The Payroll Protection Program (PPP) is not a Small Business Loan it is Just Another Form of Unemployment

The government was given $350 Billion for Small Businesses. This money was supposed to be used to give Small Businesses an ECONOMIC INJURY DISASTER LOAN (EIDL) to make up for the loss of Sales and Revenue while the business is forced to be closed. The money was not supposed to be to pay your employees for 8 weeks who were not working, that is what unemployment is for. So now over 3 weeks since small businesses were first aloud to apply for EIDL, not one penny has been given out.

Originally it was announced that the EIDL Loan would be for up to $2 Million with anything under $200,000 not needing a personal guarantee, but everything changes on a daily basis. And once they added the PPP, which only gives the business money to pay their non-working employees for 8 weeks, they have now changed the EIDL. Since almost all of the $350 Billion is being used for the PPP or No Help Payroll Loan, they now have only put aside about $7 Billion of the $350 Billion for the EIDL. The Rest is for the PPP Loan.

So now the EIDL Loan can only be up to $15,000 per Business instead of up to $2 Million. $15,000 won’t do anything for a Business that has to be closed for 3 months. For example, if a business would have done $300,000 in sales for those 3 closed months, $15,000 won’t do anything, they will need a minimum of $150,000 just to cover the loss of profits.

So now they are asking for another $250 Billion for Small Businesses. That’s great, if it were to be used for the EIDL But Senate Leader, Mitch McConnell (R-KY), wants the entire $250 Billion to be used SOLEY FOR THE PPP. This is just plain wrong. If they do this and give all the money for Small Business to the PPP Loan, then ALL SMALL BUSINESSES WILL GO OUT OF BUSINESS.

PLAIN AND SIMPLE. SMALL BUSINESSES NEED TO GET AN ECONIMIC INJURY DISASTER LOAN TO COVER THEIR LOSS OF SALES AND REVENUE DURING THE PERIOD THAT THEY ARE FORCED TO BE CLOSED AND THEY NEED IT NOW. THEY CAN’T WAIT OVER A MONTH FROM INITIALLY APPLYING AND ANOTHER MONTH FROM NOW FOR A TOTAL OF 2 MONTHS. THEY DO NOT NEED MONEY TO PAY EMPLOYEES THAT CAN ALREADY GET AN EXTRA $600 ABOVE THEIR ORIGINAL UNEMPLOYMENT AMOUNT AND FOR 39 WEEKS IN NEW YORK.

Under the PPP, as long as you use 75% of the loan on payroll in the first 8 weeks, you do not have to pay it back. They are also offering up to $10,000 of the EIDL loan, or up to $1000 per employee to be a grant that doesn’t have to be paid back. Then that added $25,000 Bridge Loan, then that disappeared.

THE WAY THIS SHOULD HAVE BEEN DONE WAS TO GIVE OUT WITHIN THE FIRST 2 WEEKS OF CLOSURES OF BUSINESSES THE ECONIMIC INJURY DISASTER LOAN IN THE AMOUNT THAT COVERS AT LEAST 3 MONTHS OF PROFIT FROM SALES. THEN FROM THERE YOU CAN OFFER THE OPTION THAT WHAT EVER AMOUNT OF THAT LOAN THAT IS USED ON PAYROLL FOR THE FIRST 8 WEEKS WILL NOT HAVE TO BE PAID BACK. THEN YOU COULD HAVE ALSO STATED THAT THE FIRST $10,000 OF THAT LOAN WOULD BE CONSIDERED A GRANT THAT WOULD NOT HAVE TO BE PAID BACK!

For Example, A COMPANY GETS A $300,000 LOAN FOR THEIR LOSS OF PROFIT OVER 3 MONTHS. OF THAT $300,000 LOAN, $10,000 SHOULD BECONSIDERED A GRANT THAT DOES NOT HAVE TO BE PAID BACK. SO NOW OF THAT REMAINING $290,000, LET’S SAY $40,000 WAS USED FOR PAYING YOUR EMPLOYEES THAT ARENT WORKING FOR 8 WEEKS, SO YOU DO NOT HAVE TO PAY THAT BACK AS WELL, AND NOW YOU HAVE A PAYBACK LOAN OF $250,000.