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Should You Return Your Paycheck Protection Program Loan Money?


The Paycheck Protection Program, a provision of the CARES Act designed to grant relief to small businesses, has turned out to be anything but pennies from heaven.  No one was surprised that the first round of funding disappeared so quickly, since the restrictions on commercial activities were so severe that virtually every small business in the United States was in need of emergency funding.  The realization that some large, national corporations had taken some of the loan money only increased small business owners’ disillusionment.  Only after the businesses that borrowed money meant to support small businesses returned their loans, and only after Congress approved a second round of funding did many of the businesses in the Washington DC metropolitan area receive the PPP loans for which they applied.  Now that they have the money, some small business owners in the Maryland suburbs of DC have decided to return the funds to receive.  A Maryland small business lawyer can help you decide whether your PPP loan is a help or a hindrance in the final weeks leading up to reopening.

Maryland Small Business Owners Are Still in a Pickle, Even with PPP Loans

A report in the Baltimore Sun presents a dire picture of the state of small business in partially reopened Maryland.  Many businesses that received PPP loans had to wait over a month to get the money, depleting their cash reserves and personal savings in the interim.  Meanwhile, a provision in the terms of the loan put them in a difficult situation.  If recipients use 75 percent of the loan money to process payroll before businesses reopen, the loan is forgivable; otherwise, they must pay it back with interest.  Even worse, they can’t pay their own salaries with PPP money.  Here are some Maryland businesses faced with the prospect of paying interest on PPP loans and what the owners decided to do:

  • Lee Hirschmann, owner of the Band Shoppe, a musical instrument store in Catonsville, received a $15,000 PPP loan long after he applied. Now that he has it, he is no longer eligible for unemployment insurance.  Like all PPP recipients, he can use up to 25 percent of the loan money, but then he won’t be able to deduct those business expenses on his next tax return, leaving him with a hefty tax bill next spring.
  • April Richardson, owner of Baked in Baltimore, received a PPP loan and has mixed feelings about reopening. She would like to pay her employees with the PPP money, but she isn’t sure it is safe for them to come back to work.  Her only option might be to use PPP money to pay the employees when they aren’t working, or else pay the loan back with interest.
  • Yasmine Young of Diaspora Salon in Baltimore received a PPP loan shortly before finding out that the reopening of hair salons in Baltimore has been delayed. The loan is for $22,000, but she is debating whether to keep it, because paying it back with interest may prove more expensive than not having the loan money at all.

Let Us Help You Today

Now that businesses are starting to reopen in the DC area, it’s time to discuss long-term strategy with a business law attorney.  Contact the Washington DC small business law attorneys at Tobin O’Connor Concino P.C. for a consultation.




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