This article is written by someone without a clue.
PPP works for businesses who kept their employees.
In hardest hit areas, small businesses are largely closed. Small businesses can’t afford to carry their staff when closed. (Kind of obvious!)
The additional $600 in weekly unemployment benefit in CARES was better for their employees anyways! (In NY, if the employee earned under about $52k a year; state plus CARES umemployment is more lucrative than working) - so why pay them out of pocket if they can earn more on unemployment?
So - for smaller companies - you are doing your employees a favor by putting them on unemployment.
More unemployment benefits for closed business employees; PPP for operating companies. Makes perfect sense.
Larger - essential employers (mainly) who kept their people employed - that is precisely what PPP was for. In fact, you need to be a larger company (more reserves) or still making money to consider PPP.
My bank did thousands of PPP loans.
The biggest challenge will be getting the loans forgiven.
If the borrower has a smaller staff now than at 2/15/20 and don’t bring them all back by 6/30/20, the loan forgiveness will be proportionate. (Unforgiven portion to be paid back in about 22 months at 1% interest.) Could be ugly for the unprepared.
Another twist: Companies that stayed in business, such as roofing companies, continued to operate, took the loan, used it to pay their employees and pocketed the extra cash.
The PPP loan will probably save my small service business in suburban NYC. We applied for the loan on 4/8 at a regional bank where we have done business for several years. We were approved on 4/10 and the loan was funded on 4/20. Year over year business in April is down 60% and May, so far, is even worse. If I had to close shop for three or four months, the few customers that remain would go someplace else; but more importantly, I would risk losing skilled and valued employees, who are essential to the success of my business. I fully expect to retain 100% of my employees as of June 30th, and I fully expect that the loan will be forgiven in full because I will have spend at least 75% of the loan on allowed payroll costs, and the balance on rent and utilities. In the mean time, I am banking the revenues that do come in so that we have the funds to move forward after the PPP loan runs dry, although perhaps on a smaller scale.
I looked at the PPP and you’re right. It was not made for smaller small business. It was made for businesses with quite a few employees since the goal was to keep the employees working. EIDL was perfect for the smaller businesses but then they ruined it by basing it on number of employees which was redundant since that’s what PPP was for.
——My bank did thousands of PPP loans.——
in the final analysis, banks actually make the loans.
So, must the bank make a loan to a depositor known or believed to be not credit worthy for a loan of the amount proposed? If the business is barely there, marginal in good times, must the bank lend and then in 6 weeks hold a bad loan?
Who pays the bank for the loan loss? Who pays for administering the bad loan?