Trying to Fix the SBA - PPP & EIDL
Created by Michael Digioa
There has been a lot of acrimony and confusion surrounding the $ 2 Trillion Stimulus Package. This document is meant to aggregate people’s stories about their businesses and the shortfalls of the PPP and EIDL in order to offer possible solutions. You can add to the google doc here.
Problems and Solutions
General Problems
Not enough money
Too short a time frame for PPP
Not enough flexibility for money usage
Banks are adding adhoc rules to limit who they can loan to
Not enough liquidity for businesses that need to pivot
Some businesses will need a year or more to rebound
How do we fairly allow businesses to downsize and innovate in order to be in a better position to hire later
Specific problems
PPP is only for 2.5 1 month of operations and if you take it you need to use 75% of it for employee wages by June 30th. It’s a 1% interest rate on a 2-year loan. That’s only going to work for a small number of companies that have just a 2-month disruption and expect to be able to retain all of their workers after two months. Otherwise, we’ll just see another large wave in layoffs after the two months. Most companies will likely see a year-long reduction in revenue.
EIDL is a good deal if you want to invest in revamping your business to be able to grow over the next 2 years. But it is being limited by the SBA, last we heard they will determine how much each business can apply for and we’ve heard numbers as low as a 15k cap. Plus the grant is now 1k for every employee you have up to 10k. Companies need access to far more liquidity.
Some answers
The PPP should allow for 5 months of operations, have a tiered forgiveness program based on investment in growth, and allow a short term furlough of employees if needed. The loan should be extended to 5 years at 1% and if at any point within two years that you choose to apply for forgiveness the loan is forgiven based on what percentage of employment you have reached compared to February 2020. Or also maybe other growth factors including spending on vendors. Basically more flexible ways to show you’ve contributed to overall job growth.
EIDL money needs to be available and cheap so companies can invest and innovate and be ready to hire as the economy comes back.
Mortgage, rent, utilities, and debt freeze for two months. Mandatory for everyone, but needs a clause to deal with landlords who own property outright and are dependent on that income.
2k a month for everyone for 2 months during the freeze. The freeze is needed to give the banks time to get the loans out.
Forgiveness of 2019 payroll taxes
Stipulate what rules banks can add to loans, i.e. rules like only existing customers and a need to open a savings account shouldn’t be necessary.
We need restaurant and bar specific bailout
Stories
Some examples of different small business needs. These are some examples of how many businesses need a lot of flexibility to adapt. Most small business owners view their employees as family and are not trying to exploit them.
From CNN
Chicago Restaurant Owner
Regarding restaurants: Once the first disbursement happens, the 8-week clock starts ticking. The problem with that is I may get funds in 10 days, yet the restaurant/bar dine-in shutdown is still going possibly until the end of May. If I hire staff back, many of the same positions won’t exist (server, bartender, busboy), and I will be offering them jobs related to carry-out and delivery. I would prefer to see an emergency payout of 25% and there be more flexibility with use of the funds (pay purveyors who in turn can pay theirs, rents, utilities, service debt), and apply the money to payroll once the dine-in ban is lifted.
Chicago Event Space Company
We’re closed indefinitely and very likely there won’t be events of over 50 people for quite a while. There’s no point in keeping our current operation open yet we’ve already lost a half year worth of revenue. We still have events on the books for after May 11th (the date CDC gave for ending all gatherings until) but everything we read is that events won’t be likely through Summer or longer. Possibly into Summer of 2021 even. It doesn’t make sense for us to invest in waiting this out, we’re better off looking for another way to utilize the space. The PPP currently doesn’t really help with the hard cost of our mortgage since we only have two employees currently. Also, dozens of vendors use our space to make their revenue. Event planners, caterers, decorators, DJ’s, and more will all be looking for other work options in the coming year. If there are fewer event spaces next year then there will be fewer opportunities for all of those businesses to make money and hire as well.
Chicago Graphic Design Company
We’re a small graphic design team with two people on payroll and a roster of freelancers that we give steady work too. All of our clients are shut down as we had many clients in tourism, retail, and entertainment. So almost all projects on hold. The PPP structure is ok but it’d be nice to be able to spread out the money for longer than June 30th and also use more of it for our rent and other services we have to pay for. It would also be helpful to not have to make our quarterly payroll payment.
Chicago Based Educational Non-Profit
We’re a small 501(c)(3), educational institution that helps people improve their communication skills, so that they may advance at work, or be more attractive job candidates when applying for new or even first time positions. Our staff size varies by demand, typically we have three to four people. We had to stop two classes mid term. This affected a dozen current students and two teachers.
Our future seems to be in making the transition to virtual classrooms and online instruction, something we had done a very limited amount of. Currently, we rent classroom and office space and also go on-site where companies may hire us to have group training. While we would like to maintain that, it’s unlikely classrooms will be open soon, and we have already set up a couple of online sessions and see that demand is going to grow swiftly (people will be changing jobs/industries a lot going forward and need re-training, that’s how they view us). We will need to develop and execute marketing to a “new” audience. We will need to hire and train new staff. We need the flexibility to pivot to be doing a little of everything at once; marketing, training, teaching, administration, as well as pay our rent.
So more flexibility in the PPP to help us through the initial downturn and then some access to capital through the EIDL could help us hire more in the near future. Rent forgiveness for a few months would help as well.