Withdrawal Protection Nuts and Bolts – Press Enterprise


Joyce M. Rosenberg, The Associated Press

Small businesses may still get help from the government’s coronavirus relief plan after Congress extended its check protection program to August 8.

The program, due to expire on Tuesday, still has nearly $ 132 billion after more than 4.8 million loans have been granted since it began on April 3. Loan recipients have included businesses as diverse as restaurants, dentists, retailers, construction companies and manufacturers who have been devastated by the virus and shutdown orders issued by state and local governments in hopes of stopping it. Non-profit organizations were also eligible for the program.

The Chamber issued its final approval to extend the program last week. President Donald Trump signed it over the weekend.

The PPP is part of the $ 2 trillion coronavirus relief package adopted by Congress in March. On Monday, the Small Business Administration, which oversees the program, released the names of companies that had received loans of more than $ 150,000. They accounted for less than 15% of loans.

Some questions and answers about PPP:


The program is designed to motivate small businesses to retain employees or, if they have fired them, get them back to work. The main incentive for companies to apply for PPP loans is an offer of forgiveness if most of the money – originally 75% but later adjusted to 60% – is used for payroll. Companies can borrow up to $ 10 million based on salary costs; loans have an interest rate of 1% with deferred payment for six months. Landlords can also use money for rent, mortgage interest, and insurance. If companies cut employment or workers’ salaries, they will have to pay back some money.


The owners must use the loan money within 24 weeks of receiving it; this figure has also been revised from the original eight weeks. When the money is spent, companies can apply for forgiveness by documenting how much of it has been used for payroll, rent, mortgage interest, insurance, or other expenses.

Many companies, such as restaurants and retailers, whose revenues have dropped dramatically or have come to a complete halt, fear that they will eventually have to pay off some of their money as they have had to use some of it to restart their businesses.


The full answer to this question will not be known for the months that the owners have made requests for forgiveness, which must document the number of employees they had on their payroll. Some businesses, such as restaurants and retailers, may still not have sufficient revenues due to social distancing requirements and slower consumer spending, and may be reluctant to hire all of their employees.

If a country’s unemployment rate is an indication, PPP has indeed saved jobs. After rising to 14.7% in April, it fell to 13.3% in May and 11.1% in June after the reopening of enterprises. However, it is not known what impact the rise in coronavirus cases will have on last month’s hiring and retention.


The reaction was mixed. Certainly, the companies that received the money from the loan were happy to have a pillow, but for many there are still concerns about paying off the debt.

Companies that hire independent contractors cannot count the amount they pay these workers in their calculations, so the money they borrowed was much less than they needed. It was difficult for the sole owners and start-ups to apply and get money.

A number of obstacles disrupted and slowed down the application process. The SBA approved over 4.8 million loans in less than three months, much more than the 58,000 it approved in 2019. It started with computer problems and backlogs at agencies and banks. Many banks also infuriated the owners at first by rejecting their applications if they did not have multiple accounts, including existing loans or lines of credit. Some of the country’s largest banks took a week or more to start accepting applications.

According to the report of the Responsible Lending Center research group, these problems made it difficult for minority companies to obtain loans.

After submitting their applications, many owners waited weeks without knowing their status. Some applied at several banks hoping for better service. Their frustration was probably partly fueled by Treasury Secretary Steven Mnuchin’s prediction that they could get the money from the loan on the same day they filed their application.

Some owners were so frustrated with the process or concerned about the forgiveness that they quit and did not apply or withdraw them.


That’s part of it. But the unclaimed amount also includes the roughly $ 30 billion returned by major companies including big-name brands like the Los Angeles Lakers and Ruth’s Chris Steak House and Shake Shack restaurant chains. Many well-funded companies eventually returned their money under pressure from the public and the Treasury Department. Senior administration officials who briefed reporters ahead of the data’s release said the money was expected to be left behind from the start.


The Federal Reserve has created the Main Street lending program for small and medium-sized businesses. Offers loans starting at $ 250,000 with no principal repayment for two years. Firms apply for loans through banks.

The SBA also provides companies with so-called economic damage loans and subsidies. Owners must submit an application directly to the SBA through its website at www.sba.gov.

Many state and local governments and community development organizations also provide loans and grants.


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