The Paycheck Protection Program: Not Just for Payroll Anymore?
To say the least, the Paycheck Protection Program, a provision of the CARES Act designed specifically to help small business owners keep workers employed, did not grant small business owners’ every wish or solve all their problems. The fact that the loan money enables business owners to keep paying their employees has protected many workers from being laid off, but if PPP loan recipients spend more than 25 percent of the funds on expenses other than payroll, they will be faced with major debts and tax penalties once businesses are allowed to reopen. For many business owners, the PPP money came too late, after they had already depleted their personal savings to keep their businesses afloat. Some business owners who received PPP loans are even considering returning the loan money, having calculated that it will create more debts than it will repay. Now that reopening is on the horizon, even as COVID-19 cases continue to increase in the DC region, Congress is considering some changes to the Paycheck Protection Program that would give business owners more flexibility regarding how to use PPP funds. A Washington DC small business lawyer can help you make strategic decisions as you prepare to reopen your business.
What’s Next for Washington DC Small Businesses?
When the Paycheck Protection Program debuted in March, it let businesses that employ 500 employees or fewer borrow up to $10 million. The loans would be forgivable if the borrower used 75 percent of the money to process payroll, thus protecting employees from losing their jobs and joining the backlog of furloughed workers waiting for unemployment benefits. Loan recipients could use the other 25 percent of the funds for overhead expenses like rent or mortgage payments or utilities. If they used the money for anything else, they would have to repay it with interest and would lose the tax credit normally associated with those business expenses. In other words, using the loan money for expenses related to reopening would put loan recipients in a worse financial position than they had been in before they received the loan money.
Views on what to do next regarding economic relief for businesses affected by the coronavirus are divided sharply along partisan lines, and Congress has yet to reach an agreement about the next phase of the economic stimulus. A bill currently under review in the House would make two important changes to the PPP loans. First, recipients would have six months to spend the money instead of just two. Second, they would have much more flexibility in how to spend the forgivable loans. According to Sen. Marco Rubio (R-FL), the changes to the loan program changes the focus toward reopening; for example, recipients could use the money for personal protective equipment for workers returning to work or making changes to the workspace to prevent the spread of the virus when customers return.
Let Us Help You Today
Hope is on the horizon for DC small businesses; a small business lawyer can help you make plans and formalize agreements as your business reopens. Contact the Washington DC small business law attorneys at Tobin O’Connor Concino P.C. for a consultation.