Interest in the Paycheck Protection Program Diminished

Core Financial PartnersBusiness Owners

PPP Loan Demand Has Significantly Diminished
Just as the federal government releases round 2 of the Paycheck Protection Program (PPP) funding, it appears interest in the loans has waned. Small business owners facing the challenge of meeting their financial obligations reported that, initially, the program was too complicated to figure out in such a short period of time and the first-come, first-served funds were going out too fast. They trusted another round of funding would come around after they’d had time to gain understanding of the rules.

But by the time round 2 was issued, these same small-business owners had realized the program likely wouldn’t meet their needs. The business owners who most needed the funds, namely restaurant owners, weren’t sure when they’d be able to bring workers back. It didn’t make sense to send workers on unemployment, bring them back with the federal funding for eight weeks, and then send them back on unemployment again if the mandated closures were extended.

Small-business owners also reported anxiety about taking on more debt. Especially in the restaurant business, where profit margins are slim, taking on more debt with a 2-year payback period wasn’t practical, even if guidance allowed them to operate at full-capacity.

Additional frustrations with the program included ever-changing guidance; changing forms; technical difficulties; and banks restricting applicants – prioritizing their largest clients and in some cases excluding business owners who were not already customer prior to the crisis. Small-business owners also expressed fears that they would be accused by the government of misrepresenting their financial situation, despite the federal government statement that loans under $2 million are automatically considered as having been received in good faith. As of May 28, 2020, the unused funds stood at approximately $140 billion, while small-businesses across the U.S. made the decision to close their doors permanently.

The article “Why the Small Business Rescue Program Has Slowed Way Down” by Danielle Kurtzleben, 05/28/2020, https://www.npr.org/2020/05/28/863387203/why-the-small-business-rescue-program-has-slowed-way-down was referenced for this article.