Even as a new round of billion-dollar relief hits Main Street this week, some small business owners fear the money still isn’t enough — and comes attached with so many strings that it won’t help their long-term survival.
The latest version of the Paycheck Protection Program is expected to provide another $310 billion to help limit the economic meltdown caused by the coronavirus pandemic.
But for these federally backed loans to be forgiven, recipients must within eight weeks spend 75 percent of funds on payroll to employees who were on the books as the pandemic broke out. The remaining money can be spent on rent, utilities, employee healthcare benefits and mortgage payments.
Nicole Marquis, owner of restaurant HipCityVeg in Philadelphia and a recipient of the most recent round of federal aide, said future packages must “provide flexibility in timing to use it.”
She said if the federal government believes businesses will be up and running in two months, that’s not the reality she sees.
“Now we know that’s preposterous, that’s not gonna happen,” Marquis told NBC News.
“The growing reality is our industry will be nowhere near full operating capacity by then or for a long time.”
It’s unclear how much the small business lending program can hold back the surge in joblessness — a record 22 million people sought unemployment aid in the past month. Most economists forecast the unemployment rate will reach between 15% and 20% when the monthly jobs report is released in early May.
More money is clearly needed: Roughly 1.6 million small companies were able to obtain loans, the Small Business Administration said, out of at least 6 million that were likely eligible, according to Census data. Bank of America economists estimate that another $650 billion would be necessary to meet demand.
Even if companies are able to secure money from the program, if they don’t spend it as they’re required, it then converts into a low-interest loan.
Briana and Andrew Volk, owners of The Portland Hunt + Alpine Club in Portland, Maine, said they’re grateful for the PPP, but fear even low-interest loans could work out to be burdensome for small businesses.
“We fully believe we’ll be back open and running this year, Briana Volk said. “But if the virus comes back and we have to self-isolate again, it could two years before we’re back to 100 percent.”
“Who knows what will happen? We might not be able to pay the loan back even if we wanted to. It becomes really scary and uncomfortable.”
Holly Wade, director of research and policy analysis for the small business advocacy group the National Federation of Independent Business, said she’s been hearing these critiques of PPP from operators across the country.
While largely agreeing with those complaints, Wade insists there’s still benefit in receiving money that can be immediately passed on to employees — especially those with unique skills that can’t be easily replaced, or would take weeks to have replacements trained.
“Keeping the band together, that’s the best analogy for it,” Wade said of individual businesses and their employees.
“You want to keep these workforces intact as much as possible. So when you’re on the other side of the economic crisis, you can roll more quickly.”
The Associated Press contributed.