Questions Facing Small Businesses

Published on July 8, 2020

Since April, $521 billion in Paycheck Protection Program (PPP) loans have been distributed to 650,000 businesses with fewer than 500 employees, a list of loan recipients has been released and the deadline for filing a new loan has been extended from June to August 8, 2020. According to the People’s Pundit Daily, the Small Business Administration (SBA) and Treasury Department are stating the (PPP) has “potentially saved at least 51 million jobs, with small businesses employing 59.9 million across the country, that represents upwards of 84% of all their employees.”

The (SBA) is confident the program is working on behalf of small businesses as (SBA) Administrator Jovita Carranza says, “The PPP is an indisputable success for small businesses, especially to the communities in which these employers serve as the main job creators.” But with the extensions, rule changes, and public disclosure of loan recipients, a small business owner may be asking, “Where do we go from here?”

The (PPP) was created to primarily deliver cash quickly for small businesses to meet payroll and retain employees due to the economic hardship resulting from COVID-19; however, many businesses applying for loans were unable to avoid laying off employees while waiting. This resulted in business owners qualifying for a loan, utilizing at least 60% for payroll, qualifying for loan forgiveness, but not able to maintain 100% of employees and only receiving forgiveness on a fraction of the amount spent during the covered period.

The covered period was originally 8 weeks and has been extended to 24 weeks. This period speaks to the time frame payroll costs incurred and payments made are eligible for loan forgiveness. The key is to only spend loan proceeds on approved payroll expenses (at least 60%) and approved non-payroll expenses (no more than 40%), as well as retaining employees or rehiring laid off employees to original levels in order to maximize loan forgiveness.

Business owners deciding to utilize available software to project labor costs and expense scenarios as well as work with a fractional, interim, or project-based CFO to deliver alpha [added value and Return on Investment (ROI)] will help answer the question, “Where do we go from here?”