NYC Gazette

There are billions of dollars still on the table for small businesses struggling to survive during the COVID-19 crisis, and the program’s own issues created the situation, say business owners and advocacy groups.  

The Paycheck Protection Program was confusing to navigate and had biases built in, some say.

"It was a flawed structure to begin with," said John Arensmeyer, CEO of Small Business Majority, an advocacy group. "It favored established businesses. It was set up to give money to people with strong banking relationships."

Loans designed to help companies devastated by shutdowns ordered by the government were meant for small businesses such as restaurants, retailers and salons.

The Chattanooga Times Free Press reported June 30 that as of June 26, the Small Business Administration (SBA) had approved 4.7 million loans that amounted to nearly $518 billion, but more than $140 billion remains unclaimed. Congress allocated $659 billion to the program.

Business owners had problems for a variety of reasons.

The Times Free Press reported that banks denied companies that didn’t have multiple accounts. This meant sole proprietors and freelancers had to wait and couldn’t supply the information the government and banks demanded, and that left a lot of businesses out of the loop.

Businesses that secured these loans (and hoped to) liked the promise that the loans would be forgiven, but there was no clarity about how to qualify for forgiveness. Even worse, those requirements changed regularly. 

The Government Accountability Office noted that the SBA and Treasury Department didn’t release instructions and applications for loan forgiveness until May 22. Before that,  in a span of 16 days, the SBA made 35 changes to rules and to the program’s frequently asked questions.

Many small business owners gave up because it was too complicated, and the stakes were too high when it came to forgiveness.

Small business advocates knew there was a problem when the legislation was signed and they started looking at shutdown orders.

“We know it was a problem a week after the legislation was signed, when we looked at the shutdown orders,” said Karen Kerrigan, CEO of the Small Business & Entrepreneurship Council. 

She told the paper that business closures were going to longer than expected and that the impact would be an issue long after the June 30 deadline to spend the money and bring people back to work.

Another issue with the forgiveness and these loans was the requirement that small businesses spend 75 percent or more of the loan on payroll. Many businesses needed funding to support other costs such as rent and reopening. It wasn’t until June that the payroll requirement was dropped to 60 percent. By then it was too late for many business owners, say advocacy groups.

It also put sole proprietors, business owners who work as freelancers and new businesses, as well as business owners who hire independent contractors at a disadvantage.