The rules surrounding small business loans from the Paycheck Protection Program (PPP) are being overhauled as demand cools and small and medium-sized business (SMBs) owners voice complaints that the money is hard to get.
“When we conceived the program, we thought businesses would be able to get up and running after eight weeks, but we know now that’s not the case,” Sen. Ben Cardin (D-Maryland) said in a statement, according to a Wall Street Journal (WSJ) report on Sunday (May 17).
One of the changes would allow SMBs to use the funds in more ways than originally conceived. The rules had mandated that 75 percent of the forgivable loans backed by the Small Business Administration (SBA) had to be used to retain employees.
Another change would extend the two-month time period SMBs had to use the funds. Many owners of restaurants and hair salons said they could not rehire staff while their businesses were told to close amid the coronavirus pandemic.
“Liberalizing the rules by lowering the requirement to spend 75% on payroll-related costs and/or extending the time frame that funds can be used is critical for the survival prospects of millions of small businesses, and the ultimate success of this program,” said Ann Marie Mehlum, a former top SBA official and senior adviser at FS Vector, a financial advisory firm.
The Treasury Department and the SBA are expected to announce new guidelines concerning loan forgiveness and technical issues that need repair.
More changes could be considered to meet requests made by other agencies, such as a request by the National Federation of Independent Businesses to extend the time businesses had to repay the loans from two years to five years.
The PPP loan process has been challenging, given the overwhelming volume of applications. Episode 5 of the ongoing series of conversations between Planters First Bancorp CEO Dan Speight, Ingo Money CEO Drew Edwards and Karen Webster takes the PYMNTS community inside the PPP’s black box.