The highly anticipated PPP loan forgiveness guidelines are expected to be released
“I think we will have the application and guidelines by today,” Rubio, R-Fla., Told ABC News on Wednesday night. He gave some pointers to simplify the application that borrowers must submit in order for him to have their loan considered for forgiveness.
“There was also some misunderstanding about overlap between the emergency loans and their treatment,” Rubio said, adding that there might also be “a little bit of extra flexibility” about requiring employers to keep their employees at pre-existing levels for eight years Pandemic hold weeks under the program, a near-impossibility for many companies still closed due to COVID-19.
Rubio said he and Cardin spoke to Treasury Secretary Steven Mnuchin on Tuesday. Cardin said he was shown a draft of the guidelines also needed by lenders, which they consider to be key to the final repayment of loans to successful PPP applicants by the SBA.
SBA early stated in more general guidelines that PPP loans, designed to help businesses keep paychecks flowing for eight weeks, would be awarded if 75% of loan proceeds were used for wages and salaries and 25% for overheads like mortgages and rent payments as well as ancillary costs. Legislators on both sides of the aisle said this fork needs to be flexible to accommodate businesses with high operating costs, but Rubio told ABC News on Wednesday that there is “less agreement” on exactly how to fix the problem.
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In addition, the finance department advised loan recipients early on, “The amount of loan granted will decrease if a business owner reduces the number of full-time employees, if salaries are reduced by more than 25%.”
But those owners who got the first funded PPP loans are nearing the end of that eight week period, and they – and their lenders – want to know what it takes for SBA to make the loans – and to repay the banks and others Non-banks.
“We still don’t have guidance from SBA, and business owners, in many cases, are concerned about how exactly these funds should be used because of unused uses by Congress,” a banking industry source told ABC News. “It’s crazy. Banks need this guide. Corporations need it. It’s like we’re in a state of suspension – we’re waiting.”
The lack of clear guidelines is why some loan recipients are afraid to use the money. You don’t want to be on the hook for a loan; You simply cannot afford to repay even with a low 1% interest rate over a two-year period. And according to the latest treasury guidelines, small business owners who have received a PPP loan have until May 14th to return it with no penalty. Another reason some people pay close attention to the instructions.
“When someone in the federal government – you know the old phrase – says,” I’m from the federal government, I’m here to help you, “people don’t trust the federal government,” said Senator John Kennedy. R-LA., Who said he has heard from many business owners who are deeply frustrated with the lack of clear guidelines for the program.
“A lot of my companies and bankers are very nervous that not so much progress is being made but that bureaucracy is going to double it up and say, ‘We know what we told you then, but this is now. ‘I would really love it if the administration and the Treasury department bring that up. This is wrong. That’s immoral, “said Kennedy.
Naomi Pomeroy, the Portland-based owner of Beast and Expatriate, said she had received a PPP loan and had been directed by her banker to expect guidance on forgiveness soon. That was at the end of April.
Pomeroy had to lay off all of her staff in March due to the pandemic and doesn’t know when to open her 26-seat restaurant amid concerns about social distancing. This made her wonder if the PPP loan was a really good fit.
“It’s very frustrating and almost impossible to use,” Pomeroy said of PPP.
She is also part of a coalition of independent restaurant owners who are asking that Congress provide their industry with a much-needed lifeline in the form of a $ 120 billion stabilization fund. Grant amounts would be based on the degree of destruction per company and would only be directed to independent restaurants, not large chains or public companies.
Emmett Soldati, owner of Teatotaller, a Somersworth, New Hampshire coffee shop who has documented his problems with PPP on Twitter, said he didn’t know how the requirement to get back on loan within eight weeks of getting a loan worked for him should company.
“If you’re a restaurant owner like me, you may be pushed to either compete with federal unemployment (just to cut your staff’s wages when it runs out?) Or immediately hire people who are not unemployed and hope so serves * some * business goals ” tweeted Soldati.
Some desperate business owners didn’t apply out of fear, even though PPP still has federal funding.
Nina Compton, owner of Compère Lapin and Bywater Bistro in New Orleans, had to close both award-winning restaurants and said she didn’t know what she and her husband were going to do.
“It broke my heart,” said Compton. “We went through Hurricane Katrina, the BP oil spill.” We were asked, “How do we survive this?” We honestly don’t know … things like the PPP, my husband and I investigated. It doesn’t work for us. The origin of the loan – eight weeks to hire people back. I also think that it will be impossible to be forgiven. “
Experts say there are still many unanswered questions about tax implications.
“The records and bookkeeping to keep up with that is pretty daunting. I have encouraged the small businesses I advise to put this in a completely separate account, ”said Michael Burcham, professor at Vanderbilt University’s Owen School of Management.
“This will be almost a fault until the situation is proven innocent. You must have tedious bookkeeping, “said Burcham, adding,” Do you remember what you spent eight weeks ago? Is it in a format that our government may want? “
Those in the restaurant and hospitality sectors, among the hardest hit by the pandemic, are fighting to make PPP work for them and are calling on Congress to make legislative changes to allow flexibility so that more borrowers have the hope of raising lending standards to be observed.
“In other words, small businesses that keep or hire all of their workforce are rewarded, while those that can’t are penalized. The fact is, it is many who fail to bring their workforce back that have been hurt the most, ”wrote Mat Sorensen, CEO and attorney for Directed IRA & Directed Trust Company, recently in the online magazine Entrepreneur.
Sens. Rubio and Cardin said Wednesday that they plan to draft a bill to extend the eight-week period, although no one has yet been able to say what the impact of the change could be.
In the House of Representatives, the newly introduced $ 3 trillion coronavirus relief bill extends the requirement that employees be reinstated and remain on payroll from eight weeks to 24 chamber weeks.
Although the appetite for a bipartisan compromise that led to the creation of the historic PPP program in record time has waned in recent weeks, Senators from both parties said that legislative action to set PPP is a must.
“Absolutely. I’ll take a look. We have to fix this,” said Senator Kennedy, who is passionate about his leadership’s plan to halt massive federal spending to see how funding efforts have played out in the past different. We have to do something to help. “