Small business owners don't want to use the Payroll Protection Program loans to actually keep workers on the payroll. They want to use it to pay off other things, because there's no point in paying workers with no demand.
When a $192,000 loan from the federal government’s small-business aid program arrived in his bank account last month, George Evageliou, the founder of a custom woodworking company, felt like one of the lucky ones.
Under the program’s rules, Mr. Evageliou has eight weeks from the day he received the cash to spend it. But nearly three weeks after the clock started on April 14, he hasn’t used a penny.
His quandary? If Mr. Evageliou wants his loan to be forgiven, he must spend three-quarters of it paying the 16 workers he laid off from Urban Homecraft, his Brooklyn business, in late March. But bringing his workers back now, when they can’t work in their fabrication shop or install woodwork in clients’ homes, won’t help his business. And if New York City remains shut when his eight weeks are up in mid-June, Mr. Evageliou would have to lay off his employees again — something he wants to spare them.
The government has “made this so hard to use,” he said. “It starts to feel like a lose-lose situation.”
The $660 billion Paycheck Protection Program was meant to extend a lifeline to small businesses battered by the pandemic, allowing them to keep employees on the payroll. But it has been dogged by problems. Countless small businesses couldn’t get money, and hundreds of millions of dollars instead flowed to publicly traded companies.
Now many of the small businesses that did get loans are sitting on the money, unsure about whether and how to spend it. That’s compromising the effectiveness of a program meant to help stabilize the country’s reeling economy.
Some owners don’t see the point of hiring back workers when business is so slow. Others chafe at having to use the money within eight weeks, when they would like to keep the financial cushion for longer. And many of the owners are confused about whether they have any flexibility. They would rather use the cash to retool their operations for an altered world or buy protective equipment for workers, but the rules require them to spend it on specific expenses, like payroll.
Owners also say they are afraid of running afoul of the program’s rules, which are complicated, ambiguous and still evolving. Accountants, lawyers and lenders are struggling to understand the nuances and offering clients tentative guidance.
“It’s chaos,” said Howard M. Berkower, a New York lawyer who advises corporate clients. “It’s impossible for businesses to have any degree of comfort that they’re following the rules when the rules are still being written.”
I don't know how I feel about this.
On one hand, I understand that the Trump regime tends to change the rules all they want to as far as enforcement, and I certainly would be wary of taking a PPP loan knowing that the regime could suddenly demand, say, all the money back from all PPP recipients in California or New York because of surprise fine print.
On the other hand, paying your workers would help solve the demand problem, now wouldn't it?
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