How are PPP loans used eight weeks later?
Eight weeks ago today, the Coronavirus Aid, Relief and Economic Security Act became law. We came back with some of the small businesses and banks we spoke that first day to find out what the law did and didn’t do for them.
It took a full week after the CARES act came into effect for the small business loan provision, known as the Paycheck Protection Program, to become operational. At the end of the day, Ashwin Deshmukh said he was finally making progress in securing a loan for his New York cocktail bar.
“I have a feeling that we can get at least one loan – if not today, until the middle of next week,” he said. It took over a month.
But this week, Deshmukh said he was optimistic. He pulls to reopen the bar for take out and delivery within a week from today. And he’s using the loan money to hire a new chef, work on a whole new cocktail menu, and start selling baked goods.
“These are things we wouldn’t focus on if the world was different right now,” Deshmukh said.
Like many business owners who have obtained PPP loans, Deshmukh is struggling to meet the loan cancellation requirements. Companies must spend 75% on payroll within eight weeks.
That’s a problem for Ken Giddon, who is a co-owner of a men’s clothing store in New York City.
“Our eight week period would be eight weeks during which we are closed,” Giddon said. “Then it is virtually impossible to meet the salary obligations to get the loan forgiven. “
And he said having to spend most of the loan money on payroll means he can’t spend it on what he calls his biggest problem – rent.
“The pay is flexible. The rent is not. And rent can bankrupt small businesses, ”he said.
Some small businesses don’t worry about their loan cancellation.
Lorilyn Wilson is the co-owner of an accounting firm in Portland, Oregon. She took out a PPP loan and said she preferred to keep the cash on hand and repay the loan later.
“Because it’s like I don’t want all of my employees to be employed today, I also want them to be employed in three months, six months, nine months, a year,” Wilson said.
But there is a risk that small businesses will not be able to repay their loans if the virus reappears later this year, Wilson said.
“Then the fear is, ‘Okay, can I really continue to operate my business or will I be forced to shut down again in six months? »», She declared.
She added that small business owners fear they will be caught in a cycle of rehiring and firing.