What Follows PPP For Small Businesses: A Webinar with Sen. Susan Collins
July 23, 2020
July 23, 2020
As of May 28, 2021, the Paycheck Protection Program has run out of funding. You can learn more about the PPP with our COVID-19 resource hub.
Despite being 18 weeks into the new normal imposed by COVID-19, the challenges we faced at the beginning are still a painful reality for a lot of small business owners. Government small business loan programs like the Paycheck Protection Program (PPP) were a huge help for small business owners when PPP funds werenâ€™t being awarded to large public companies, but new outbreaks in the American south and southwest combined with resurging case numbers in cities like Pittsburgh have put businesses under more pressure to either readjust to re-closing orders or change their operating model to accommodate social distancing and sanitation procedures. These changes have hurt revenues and put small businesses in precarious positions.
The situation has left people asking for answers about whatâ€™s next in the governmentâ€™s strategy to support small businesses. Biz2Credit recently hosted a webinar with Senator Susan Collins (R-Maine) to discover whatâ€™s next for small businesses and what to expect in the coming months. Senator Collins was an influential co-author of the PPP, along with other Senate republican leaders in congress like Marco Rubio,
If you didnâ€™t get a chance to attend, you can watch the full webinar here when you have a spare moment. Below, weâ€™ve outlined below the four biggest takeaways from the discussion.
The original $350 billion dollar program provided 100% federally guaranteed forgivable loans meant to help small businesses, as defined by the Small Business Administration (SBA), weather the crisis caused by COVID-19 and allow them to continue to meet payroll and other obligations while economic conditions recovered. The program has undergone some changes and rejuvenation that small business owners should be aware of.
While the original June 30th deadline has come and gone, small business owners who havenâ€™t yet applied for funding may not know that the PPP was recently rejuvenated and extended. The federal government recently cleared an extension of the PPP from June 3rd until August 8th. Previous actions had bolstered the program with an additional $320 billion in available loans. As of July 2nd, there was still $120 billion of the second injection of $320 billion in loans left untouched.
A few other important changes were made in this extension. The first is most relevant to businesses hoping to qualify for PPP loan forgiveness. The portion of the loan that must be spent on payroll in order for the loan to be fully forgivable was lowered to 60%. Additionally, the period over which businesses can use the money was extended from the original 8-week time horizon.
The next iteration of the PPP is being discussed as we speak. Plenty of names are thrown around including the â€śP4â€ť: The â€śPrioritized Paycheck Protection Programâ€ť.
The new bill, if it is passed, would include a number of new provisions for the loan and the chance for businesses to apply for a second PPP type loan if they need extra financial support. Here are some of the highlights from a draft we obtained: Businesses looking to apply for a second loan will…
The proposed application deadline for this new program would be October 1st, 2020. You would be able to get the loan through your original or a new lender. The max loan amounts will remain the same ad in the original program: the maximum loan amount will be $2 million or the average of your monthly payroll costs x 2.5, whichever is smaller. Special conditions are included to mandate plans to prioritize businesses with 10 or fewer employees. Forgiveness can be obtained if you meet the criteria and apply within 8 weeks of getting the loan (before December 31st, 2020).
BIG DISCLAIMER: Remember, this is a proposed version of a new bill. The likelihood of it passing is unclear, and there could be substantial changes between this draft and the (potentially) passed draft of the bill.
Senator Collins also mentioned that the senate has been looking into options to make changes to the existing program, calling these changes the â€śPPP2â€ť. Below weâ€™ll list some of the most relevant bits of information we learned from the senator about these potential changes:
The reality is that any changes or expansions are subject to political will and agreement within the Senate, House, and Trump Administration. Currently, there is a lot of disagreement around the for extra funding or changes to the program, though Collins made clear that she believes additional aid is necessary. Time will tell what comes out of the next iteration of the governmentâ€™s response to the pandemic.
Erik focused his presentation on how CPAs and business accountants will play a valuable role in advising small businesses as they navigate new economic conditions, changing government aid programs and guidance, and adjusting expectations to align with the â€śnew normalâ€ť. Businesses will have to review their business plans and adjust their financial forecasts to account for business stoppage and expenditures on things like PPP and new guidance from the Treasury Department are coming out seemingly every week detailing how to get PPP and other loans forgiven. These are areas where a business accountant, or strong business accounting software, will make all the difference in developing a strong response to the pandemic. Additionally, accountants can help small businesses navigate other lending programs like the Economic Injury Disaster Loan (EIDL), the Main Street Lending, and the Employee Retention Credit (ERC) programs, just to name a few. Local accountants will also be privy to local programs set up by municipal and state governments as well as local financial institutions.
Frank focused his discussion on how payroll providers can help small businesses both apply for government assistance programs, many of which doll out cash based on a businessâ€™s payroll numbers, and secure loan forgiveness. Payroll providers like Paychex are also a hub of valuable resources, especially regarding how to maintain their payroll through the coronavirus pandemic. He also mentioned that Paychex has lots of tools to help small businesses navigate the forgiveness process, including a free tool to estimate your forgiveness amount.
In sum, small business owners should know that there are professionals available to help them through this process. Your accountant and/or accounting software provider and payroll provider can be key sources of information and assistance.
While many traditional lenders have stopped taking applications for PPP loans, fintechs (financial technology companies) like Biz2Credit have been filling the gap. Whatâ€™s more, this is the first time that fintechs have been able to make loans through the SBA.
Fintechs often have a better reach when it comes to â€śactually smaller businessesâ€ť that are hurting as a result of COVID-19. As a result, small business owners may find a more easily navigable application process and more robust customer service when using fintech lenders as opposed to their traditional banking relationships.
In any case, fintechs are also helping lead the charge to lobby the government for new and more innovative forms of assistance that meet the moment. Rohit Aurora, the CEO of Biz2Credit, expressed that heâ€™s working to influence policy to include industry-specific aid programs to help lagging industries like retail and food service because the current program has resulted in large discrepancies in the distribution of aid funding across different industries