By: First Union
Fewer Strings on Next Round of Small Business Funding?
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The first round of small business bailouts proved fine for some and catastrophic for others. Perhaps it was the rush to get funds to the small companies and thus keep them from drowning that made the process problematic. Issues and hiccups abounding caused many not to receive funds, as the money was depleted much faster than anticipated. Congress is working actively to fix the glitches in this next round.
One such measure has lawmakers looking at how long businesses have to spend the money. As of now, loan recipients are required to use the money within 8 weeks of it being dispersed. Given that many businesses are either still under lockdown orders or are operating under restrictive conditions, this period of time simply isn't feasible. Lengthening the duration they have to spend funds would make a huge difference.
The other problem many business owners are facing is the mandate that at least 75% of funds be used on the payroll. One of the main issues here is that unemployment benefits are surpassing what workers would get returning to their jobs and so numerous workers are opting to stay home.
This is why a number of senators are calling for an overhaul before the release of the next few hundred billion in PPP money. In its initial phase, nearly 4 billion in loans were given out, not however without major errors and lengthy delays.
The other huge hurdle beyond the issuance of the loans themselves: forgiveness regulations. How businesses use the money and how to hire employees back in order to satisfy forgiveness requirements has been a major stumbling block for many who have thus far been given funds.
What's Being Done…
Congress is looking at a number of alternatives as far as lessening the strings attached and thus making it easier for small companies to get their money and have the loan ultimately forgiven.
Among the ideas being tossed around: doubling the amount of time, a firm has in which to spend the money. They are also considering a program that would actually approve loans for midsized businesses (those with up to 5000 employees/) and in doing so affiliate the amount of loan forgiveness with revenue drop-offs.
First and foremost though, the SBA and Treasury Department have to come together and clearly spell out guidelines for loan forgiveness—interpretations across the board have varied, widely so. In the weeks ahead many businesses will be looking to apply for forgiveness and yet the process is confusing at best. The reason many companies took on the loans in the first place was that they were assured that such would be converted to grants. And yet what if they fail to satisfy requirements, then what?
Lenders themselves are at something of a loss when it comes to how forgiveness works exactly. The banks constitute the middlemen between the companies granted loans and the SBA, so if they don't have accurate information, let's just say, the situation could get a lot worse before getting better.
At First Union Lending, we are here to help throughout this difficult period. If your small business requires additional capital to stay afloat, we likely have a program that can assist you. Call today to find out more!