Jackie Laundon was already on the phone when I called her and tried to get a response from her bank on how to get her Paycheck Protection Program (PPP) loan forgiven. She had been put on hold twice only to be shunted back to the original menu. She had no more clarity than when she had called 45 minutes earlier. It was the second time she tried to reach the bank by phone.
Laundon is a public health consultant in Denver, Colorado, where she works with state and local government agencies as the sole owner of the business she started late last year. When the Covid-19 pandemic hit, two major contracts were coming to an end and she was unable to perform the normal network that brings in more work. The public health agencies she usually works with all suffer from budget cuts. So she decided she needed help getting through, and OPP seemed like “the most straightforward”
Congress created the PPP when it passed the CARES law in March, with the aim of pulling billions of dollars through banks for companies suffering from widespread lockdowns during the pandemic. The loans were primarily intended to cover the payroll, a way to keep employees making money while stopping companies from going under, and they were designed to be completely forgiven if used properly.
But getting the $ 15,000 Laundon received forgiven has been anything but straightforward. She tried to figure out what would be needed to get forgiveness the day after she got her loan, but her lender did not have the information. The Small Business Association (SBA), the federal agency that oversees the program, had originally issued rules that the money should be spent in eight weeks, so Laundon did just that. “I was like, ‘Okay, it’s been eight weeks, where’s my application for forgiveness?'”
Laundon continued to check her lender’s website for the next five months to see if there was anything on how to apply for forgiveness, but it was not until October that she was told she could start applying. . By mid-October, she had still not managed to submit her application. There is a deadline for applying for forgiveness: Business owners must apply within 10 months of their PPP loan ending to avoid having to start payments.
The SBA issued an “EZ application” for PPP forgiveness on June 16, but business owners cannot submit the forms directly to the agency – they must go through their lenders instead. And both banks and the SBA have hardly gotten things off the ground.
According to the Government Accountability Office, the SBA received only about 56,000 decisions to forgive loans from banks by September 8 – which is only 1 percent of the 5.2 million loans issued. No one had actually been forgiven per. October 1st. Meanwhile, the SBA issued new information and rules on July 23, August 4 and August 11, and it was still not finished creating a process for reviewing lenders’ decisions on August 14. On October 1, the SBA said it would begin forgiving loans after banks and borrowers complained.
Laundon is not the only small business owner waiting anxiously for the chance to get his PPP loan forgiven when the process drags on. In a survey of 93 small business owners conducted in late September that was shared exclusively with Vox, the Main Street Alliance found that 39 percent have tried to start the forgiveness process but have been told that their banks not ready. More than a third are concerned that the lengthy process is leaving them sitting on potential debt and affecting their credit rating. There is a lack of clarity on whether PPP loans will be taxed as business income or as an expense, leaving tax planning at the end of the year more complicated.
Minneapolis-based Kevin Brown, owner of print service company Smart Set, closely followed the program’s rules and spent his $ 35,000 PPP loan on payroll and other expenses as permitted and within the proper time frame. “And then it was like, ‘Okay, what’s next?’ “, He said. “The answer was, ‘Good luck, you’re alone. “”
As soon as the SBA published papers for forgiveness, Brown downloaded it and spent three hours going over it with his accountant. They were not even finished, but they were able to make a list of all the documents they needed and fill out the application. In late June, he contacted his banker about what to do with the papers. His banker asked him not to send it in yet. That was the last time he had any announcement from his banker about PPP forgiveness.
“I have never asked for charity from the government,” Brown said. “I am very committed to keeping my conclusion on the agreement. But at some point, it’s like, what’s the government’s end to the deal? “While he is waiting to submit his application for forgiveness, he is buying new equipment, which he was set to buy in early March.
At the time, Brown had talked to his banker about rolling out a loan for another piece of equipment, which he just paid for a new one to cover the cost. Now that he is facing his busy season in November and December, he is eager to actually buy it. But Brown has an outstanding loan of $ 35,000 on his books, so his banker cannot issue the new loan even though they both know the PPP loan must be forgiven.
Davis Senseman, a lawyer who works with small business owners in Minneapolis, had assumed they would already finish working with clients to get their loans forgiven now. Instead, they have clients who call and anxiously say they are seeing interest on their PPP loans. “It’s so hard to tell them … ‘We can not forgive yet,’ Senseman said. Others have decided not to use the PPP money if it is not forgiven. Some customers have even stopped calling employees back to work.
Senseman is also waiting to apply for a $ 16,500 PPP loan to be forgiven. They applied after realizing that all their small business customers would not be able to pay them for work done in January and February when businesses closed in March. They followed exactly the rules of the program. Still, they said they are not “100 percent sure” that the rules will not change again. “It requires an emotional toll,” Senseman said. “I want this debt, which should not be a debt, not to be a debt.” And if it turns into debt, even in part, it would be a “burden” that forces Senseman to start demanding payment from customers who still can’t pay.
Michael Fusco-Straub, co-owner of the Books Are Magic bookstore in Brooklyn, New York, has still not been allowed to apply for forgiveness for his $ 100,000 loan. He was told in July that it would start in August; in August he was told September; in September, October. When we spoke in October, he said the last thing he was told was November. He assumes that “their goal is not to forgive it,” so he plans to do everything he can to do it right. It would be difficult, he said, if not forgiven.
For Laundon, the delay in getting forgiveness means she is not spending her PPP money as it was meant to. “I’m pinched an ear,” she said to make sure she had $ 15,000 if she had to pay it back. She has marketed herself for smaller research projects outside of what her business needs to focus on to earn more. She has loved getting a custom email package and setting up her own website to build more business. She cannot take the classes she normally invests in to get her higher certifications and allow her to charge higher prices. “Everything I feel like cutting down on, I just cut down on,” she said.
Even when the forgiveness process is really underway, many business owners are not sure exactly what paperwork is required of them. Eighty-eight percent of respondents from the Main Street Alliance were concerned that the process was not ready, with two-thirds saying they did not understand what is eligible for forgiveness given the many changes to the program, and over half were confused, what documents are required. The details matter: About two-thirds are not afraid of having their loans forgiven, while 43 percent are worried that they have no choice if they feel a decision is not fair.
It was not that difficult for Laundon to apply for a PPP loan: She submitted income statements from January and February this year, the months in which she actually had income. She hoped that the long delay in her bank that allowed her to apply for forgiveness was due to the bank setting up a portal that would also make this process easy.
Instead, her bank told her to submit other documentation to be forgiven: It wants her to send a Form 941, which small businesses with employees submit to the IRS to show taxes withheld from the employee’s payslips, and a Form C- form 2019, which sole proprietors file with the IRS at the time of taxation. But she has no employees and was only for four weeks last year. She had not started making money, but had start-up costs, so she had a loss during that period.
Every time Laundon sends an email explaining and asking what she can send instead, she gets a form response telling her to send a 941 and Schedule C. “Right hand does not work properly with left hand, and no one really seems to understand what is needed, ”she said.
Laundon has resorted to looking at the SBA’s website and accounting blogs to try to figure out what her lender should ask her. “This is very unpaid time that we spend trying to provide this documentation,” she noted. “I’m someone who likes to make sure all my Ts are crossed and my Ice is dotted. I just want them to be very aware of what is needed. ”
Brown’s situation is more straightforward. And yet he himself is insecure once he is able to submit his forgiveness paper if it is wiped clean. The program required business owners to spend 75 percent of their money on payroll, but it was never explained whether it should be on the same employees in the same hours as the prepandemic, or whether things could be moved around – which is what he ended up having to do with its employees. Even his banker did not know the answer. If it is not forgiven, he said, it would “be pretty catastrophic.”
“It all just got fun badly done,” Laundon said. “But it’s incredibly fun because this is people’s livelihood.”
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