Jackie Loundon was already on the phone when I called her, trying to get an answer from her bank on how to get a simplified loan for her payroll protection program (PPP). She had been detained twice to return her to the original menu. She was no clearer than when she had called 45 minutes earlier. This was the second time she had tried to contact the bank by phone.
Loundon is a public health consultant in Denver, Colorado, where she works with state and local government agencies as a sole proprietor of a business she started late last year. When the Covid-19 pandemic struck, two major contracts were about to end and it was unable to do its normal networking, resulting in more work. The public health agencies she usually works with suffer from budget cuts. So she decided she needed some help to cope, and PPP seemed like the “clearest”
Congress created the PPP when it passed the CARE Act in March, which aims to direct billions of dollars through banks to companies suffering from widespread blockages during the pandemic. The loans were intended primarily to cover a payroll, a way to keep employees earning money while stopping companies from failing, and were designed to be completely simplified if used properly.
But getting the simple $ 15,000 Laundon received was anything but simple. She tried to figure out what it would take to get forgiveness the day she received her loan, but her creditor had no information. The Small Business Association (SBA), the federal agency that oversees the program, initially issued rules requiring the money to be spent in eight weeks, so Laundon did just that. “I was like, ‘Well, it’s been eight weeks, where’s my plea for forgiveness? “
For the next five months, Lowndon kept checking her creditor’s website to see if there was anything about how to apply for forgiveness, but it wasn’t until early October that she was told she could start applying. As of mid-October, she had not yet been able to submit her application. There is a deadline for applying for forgiveness: business owners must apply within 10 months of the expiration of their PPP loan to avoid the need to start payments.
The SBA released an “EZ application” for the remission of PPPs on June 16, but business owners cannot submit the forms directly to the agency – they must instead go through their lenders. Both the banks and the SBA have barely pulled things off.
According to the government’s reporting service, the SBA has received only about 56,000 decisions on whether to forgive bank loans by Sept. 8 – just 1 percent of 5.2 million loans. On October 1, it has not actually been forgiven since October 1. Meanwhile, the SBA published new information and rules on July 23, August 4 and August 11, and has not yet completed the process of reviewing creditors’ decisions as of August 14. On October 1, the SBA said it would begin forgiving loans after banks and borrowers complained.
Laundon is not the only small business owner looking forward to the chance to get a forgiveness of her PPP loan as the process drags on. In a survey of 93 small business owners in late September that was shared exclusively with Vox, the Main Street Alliance found that 39 percent had tried to begin the forgiveness process, but were told their banks were not ready. . More than a third worry that the lengthy process leaves them sitting on potential debt, which affects their creditworthiness. It is unclear whether PPP loans will be taxed as operating income or as an expense, making tax planning at the end of the year more complicated.
Minneapolis-based Kevin Brown, owner of the printing services company Smart Set, strictly followed the rules of the program, spending his $ 35,000 PPP loan to pay salaries and other expenses, as allowed and on time. And then it was like, “Okay, what’s next?” “, He said. “The answer was, ‘Good luck, you’re alone. “
As soon as the SBA released the pardon documents, Brown withdrew them and spent three hours reviewing them with his accountant. They didn’t even finish, but they managed to make a list of all the necessary documents and fill in the application. In late June, he contacted his banker about what to do with the documents. His banker told him not to send him yet. This was the last time he had a message from his banker about the remission of PPPs.
“I never wanted a charity from the government,” Brown said. “I am very committed to keeping the end of the contract. But at some point it’s like, what’s the end of the government’s deal? “While waiting to apply for forgiveness, he stopped buying new equipment, which he was supposed to buy in early March.
Brown had then talked to his banker about transferring a loan for various equipment he had just repaid in new to cover expenses. Now that he is facing his busy season in November and December, he is eager to buy it. But Brown has an outstanding $ 35,000 loan for his books, so his banker can’t issue the new loan, even if they both know the PPP loan needs to be forgiven.
Davis Sensman, a lawyer who works with small business owners in Minneapolis, had hinted that they would now work with clients to make their loans easier. Instead, they have customers who call and anxiously say they are looking at accruing interest on their PPP loans. “It’s so hard to tell them …” We can’t forgive yet, “Sensman said. Others have decided not to use the money for PPPs unless they are forgiven. Some customers have even stopped calling employees back to work.
Senseman is also waiting to apply for forgiveness of their own $ 16,500 PPP loan. They applied after realizing that all their small business clients would not be able to pay them for the work done in January and February, as the companies were closed in March. They strictly followed the rules of the program. However, they said, they are not “100 percent sure” that the rules will not change again. “It takes emotional sacrifice,” Sensman said. “I would like this debt, which should not be debt, not debt.” And if it turned into debt, even in part, it would be a “burden”, forcing Senseman to start demanding payment from customers who still can’t to pay.
Michael Fusco-Straub, co-owner of Books Are Magic in Brooklyn, New York, has not yet been eligible to apply for forgiveness for his $ 100,000 loan. He was told in July that it would begin in August; in August he was called September; in September, October. When we spoke in October, he said that the last thing he was told was November. He assumes that “their goal is not to forgive him”, so he plans to do everything possible to do it absolutely right. It would be difficult, he said, if not forgiven.
For Laundon, the delay in receiving forgiveness means that she does not use her money for PPPs in the way that is provided. “I pinched pennies,” she said, to make sure she had $ 15,000 in case she had to return it. She advertises for smaller research projects, beyond what her business should focus on in order to have more income. She stopped receiving a personalized email package and created her own website to build more business. It cannot take the classes in which it would normally invest in order to obtain higher certificates and allow it to charge higher prices. “Anything I think I can reduce, I just reduced,” she said.
Even after the forgiveness process really begins, many business owners are not sure what exactly documents will be required of them. Sixty-eight percent of Main Street Alliance respondents are concerned that the process is unclear, with two-thirds saying they do not understand what is acceptable for forgiveness given the many changes to the program, and more than half are confused about what documents are needed. . Details matter: About two-thirds fear that their loans will not be forgiven, while 43 percent are worried that they will not have the right to appeal if they think the decision is not fair.
It wasn’t too difficult for Laundon to apply for a PPP loan: She presented profit and loss statements from January and February this year, the months when she actually had income. She hoped that the long delay in her bank, which allowed her to apply for forgiveness, was due to the creation of a portal that would also facilitate the process.
Instead, her bank told her that she had to provide various documents in order to be forgiven: she wanted to send Form 941, which small companies with employees submit to the IRS to show taxes withheld from workers’ salaries, and a form from list C for 2019, which sole traders submit to the IRS at tax time. But she has no employees and only worked for four weeks last year. She hadn’t started making money, but she had start-up expenses, so there was a loss for that period of time.
Every time Laundon sends an email explaining and asking what she can send instead, she receives a response to a form that tells her to send 941 and list C. “The right hand doesn’t really work with the left hand and no one we don’t seem to understand what is needed, “she said.
Loundon went to the SBA’s website and accounting blogs to find out what her creditor should ask. “This is a lot of unpaid time we spend trying to provide this documentation,” she said. “I am a person who likes to make sure that all my Ts are crossed and my Is are variegated. I just want them to be very clear about what is needed. “
Brown’s situation is simpler. However, even he is not sure that once he manages to submit his documents for forgiveness, they will be deleted. The program requires business owners to spend 75 percent of their paychecks, but it has never been explained whether it should be for the same employees for the same hours as before the pandemic or whether things could be relocated – that’s what he is in. he finally had to deal with his employees. Not even his banker knew the answer. If it is not forgiven, he said, “it will be quite catastrophic.”
“The whole thing has just been lively poorly executed,” London said. “But it’s incredibly ridiculous, because it’s people’s livelihood.”
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