Note: The Paycheck Protection Program Flexibility Act (“PPP Flex Act”) was signed into law on June 5, 2020. The PPP Flex Act extends the availability of loans under the Paycheck Protection Program (PPP) and adjusts certain rules applicable to PPP loans. The information reflected here may therefore be outdated. We are working to update our resources to reflect these updates to the PPP, so be sure to check back soon. Please refer to the latest guidance from the SBA and Treasury to confirm current program rules and how they apply to your particular situation.
Since the coronavirus spread to the United States in January, millions of businesses have closed their doors—some for good. Consequently, more than 30 million employees have filed for unemployment benefits, breaking every record.
On April 3, the federal government launched the Paycheck Protection Program (PPP), a cornerstone of the $2 trillion CARES Act. Since then, nearly 4 million businesses have borrowed PPP loans, totaling more than $500 billion.
The original $349 billion allocated to the PPP depleted within two weeks of the program’s announcement. By the end of April, Congress allocated an additional $310 billion to replenish PPP funds. Millions of small businesses continue to scramble for federal relief.
“It became this sort of Hunger Games, free-for-all for limited funds,” Senator Rubio said Wednesday at the Town Hall. “People figured out there were limited funds available, [the funds were] going to run out, and it became a fight-for-survival… The need was always greater than the capacity.”
While the Small Business Administration (SBA) works to process millions of applications, small businesses, especially those in underserved communities, still need funding. Many are wondering what the future holds in terms of relief options.
Below are five insights we learned during the QuickBooks Town Hall.
1. We could be facing restrictions through the end of 2021
According to Senator Rubio, we could be facing social-distancing restrictions through the end of 2021.
“That may be how long it takes to develop a vaccine, clear it, and make it broadly available,” he said. “We have to start thinking in those terms, not in terms of ‘everything will be fine by November.’”
Knowing this, business planning to reopen should plan with restrictions still in place—restrictions they may have to pay for.
“It’s one thing for Walgreens and Rite Aid to put [plexiglass] in all their stores… It’s another to ask a small vendor to do that,” said Senator Rubio. “Reopening might require you to undertake some expenses that you may not have in your budget.”
2. PPP loans could extend beyond their 8-week terms
PPP loans were intended to cover at least eight weeks of payroll costs for small businesses. But what happens when eight weeks are up and businesses still haven’t opened to their full capacity due to safety restrictions?
“I don’t think there’s any question that this is not going to be solved by June 30 of this year,” said Senator Rubio. “Now is the time to address a more extended period of payroll support.”
And Senator Cardin agrees.
“When we crafted this program, we didn’t anticipate that we would still have the type of economic climate eight weeks later where small businesses cannot operate at full capacity,” he said. “So we need to be flexible.”
Senator Rubio believes lenders who have partnered with the SBA could deliver future assistance to borrowers.
“We’ve now built a stable of 5,400 lenders… I think it makes sense to just continue to build out that capacity but also to use it as the route by which any future assistance is delivered,” he said.
Borrowers who have received PPP loans could receive additional payments “through the same mechanism” to extend the terms of their loans, said Rubio.
3. A third round of PPP funding is likely on the way
Both senators agree that the second round of PPP funding may deplete within the next few weeks. And a third round of PPP funding may be needed to support more small businesses.
“I fully believe there will be a third round,” said Senator Cardin.
And this time, he hopes the next round will dedicate those funds to the businesses that truly need them.
“Our smaller small businesses need additional attention,” he said. “They did not have the same type of banking relationships as the larger of the small businesses did. They were not first in line to get the PPP help… We need to do more to help underserved communities and minority businesses.”
Now, as the federal government begins to conceptualize a third round of funding, Senator Cardin believes they now have time to be more intentional with their funding.
4. The restaurant industry may take longer to recover
“To some extent, restaurants were the first ones thrown into the crisis,” said Senator Rubio. “They’re going to be the last ones that come out of it for a lot of different reasons outside of their control.”
The restaurant industry faces unique challenges when it comes to complying with PPP loan regulations. Many of them are finding it difficult to rehire employees they laid off before they could get PPP loans. These businesses need significant funds to restock essential supplies and retrain employees—more than the PPP can offer.
Additionally, some restaurants in some regions have been allowed to reopen at a lower capacity. But their economics aren’t set up to survive at a lower capacity.
“And then there’s the uncertainty of consumer behavior,” said Senator Rubio.
He speculated that people may not eat out as much due to their fear of the pandemic. Or they may not be as willing to spend money because they’ve been unemployed or are worried about their jobs.
“These are things we just can’t anticipate and are completely out of control of the industry,” he said. “Which is why I continue to believe that hospitality needs to be treated and viewed a little bit differently from their other industries.”
5. If you follow the rules, your loan may be forgiven
More than 200 QuickBooks Town Hall registrants wrote in with questions about loan forgiveness. Business owners everywhere are concerned about the forgiveness rules changing after they accept a loan. Senator Cardin set the record straight.
“I have a very, very high degree of confidence that if you follow the law that we passed, you’re going to get the loan forgiveness,” he said.
But Senator Cardin also acknowledged that the rules business owners are required to follow to be eligible for forgiveness are restrictive. But he also suggested that Congress may change some of those standards to make it easier for businesses to get maximum forgiveness.
“That could happen,” he said. “But you can’t plan on those changes… You have to plan on the law being how it is today.”
Senator Rubio shares that confidence.
“If the forgiveness is not there, then the very intent of the law is gutted,” he said. “This was never designed to loan money and have debt put on the backs of businesses that are struggling.”
When it comes to tracking spending of PPP funds to help ensure loan forgiveness, QuickBook Capital’s General Manager, Luke Voiles, recommends approaching it in the same way you approach accounting.
“We’re working on some forms and reports that can be produced out of QuickBooks that can help automate the process to request forgiveness,” he said. “But we’re still, as the senators have both mentioned, waiting for guidance from the Treasury and SBA to understand exactly what the details look like.”
There’s more to do for small business relief
As we look to the future, all three speakers agree, there’s more to do.
“Both Senator Cardin and I are actively engaged and involved every day with the administration to make sure that the rules and the guidance that are issued are reflective of our intent,” said Senator Rubio. “We know we have a lot more to do here.”
Senator Cardin echoes the sentiment.
“We recognize we have not finished the work… We know we’re going to need to do more, and we need your input,“ he said. And he asks American business owners to make their voices heard.
“Small businesses are the backbone of the American economy,” said Voiles. “We will not be on the road to true recovery until we help small businesses get back on their feet… We’re here to do everything we possibly can to help.”
Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. Please refer to the latest guidance from the SBA and the Treasury to confirm current program rules.
QuickBooks Capital is licensed as Intuit Financing Inc. (NMLS # 1136148), a subsidiary of Intuit Inc. In California, loans are made or arranged under CFL Licensed #6054856.
Minimum loan amount varies by state.
Intuit Financing Inc. is a licensed lender in states that require a license. Our service is limited to commercial or business loans only. State licenses include: AK #10000990, CA #6054856, DC #ML1136148, FL #CF9901279, MD #03-2339, MN #MN-RL-1136148, NM #1899, ND #MB102690, RI #20183584SL, RI #20183583LL, SD #MYL.3279, TN #166418, VT #7194 and VT #7195.
Intuit Financing Inc., (d/b/a QuickBooks Capital) is an authorized SBA Paycheck Protection Program Lender.
Regulations and guidance from the SBA and the U.S. Department of the Treasury on the PPP are evolving rapidly and the above information may be outdated. Please refer to the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation.
The funding described is made available to businesses located in the United States of America and are not available in other locations.
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