Businesses can no longer apply for the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) - as of today (Thursday, April 16, 2020). The appropriated funds have been exhausted, according to the SBA: “Notice: Lapse in Appropriations. The SBA is currently unable to accept new applications for the Paycheck Protection Program based on available appropriations funding.”

The PPP loan was created in response to the COVID-19 pandemic situation, made available through the Small Business Association (SBA) and was possibly one of the most considered and researched loans that businesses, nonprofits and independent contractors would research in a very small amount of time. From the moment it was announced as an option, stipulations changed with this loan that was “designed to provide a direct incentive for small businesses to keep their workers on the payroll.”

When seeking local clarification from Dutchess County, A Little Beacon Blog was put in touch with Arnaldo Sehwerert, Ph D., Regional Director of the the Mid-Hudson Small Business Development Center. He confirmed: “The PPP is designed mainly to keep existing workers in the payroll.”

How Much Money Were We Talking?

Money was appropriated through the first round of the CARES ACT, where the Department of the Treasury was supporting the SBA in this loan. “Up to $349 billion was dedicated toward job retention and certain other expenses,” according to the Treasury’s website.

Originally, the loan came with a low interest rate to pay back, which bristled some business owners, but that changed when new requirements were introduced. According to the SBA website and the U.S. Treasury website, the PPP loan could be wiped clean with no interest paid: “SBA will forgive loans if all employees are kept on the payroll for 8 weeks and the money is used for payroll, rent, mortgage interest, or utilities.” If the loan was not used to cover these expenses, then the low interest rate would apply, and repayment would be required.

Entities who were eligible included small businesses and eligible nonprofit organizations, veterans organizations, and tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors; they’re eligible if they also meet program size standards.

The payroll, however, could only pay people who were on the company’s payroll, and not contract workers. The contract workers would be on their own to apply for their own PPP loan. For example: for a graphic design firm who regularly paid contract workers who submit 1099s for taxes, these contract workers would not be protected under the PPP with the employing company, and would need to apply for their own PPP loan.

If the business owner herself was on payroll as the only employee, she would be eligible under the terms of the loan, and the loan could be forgiven when paid out. But if client work dried up and there was nothing to pay contract workers, the way the PPP loan as written could not help her 1099 contract team, unless they applied for and were approved for their own loans.

Many Pandemic-Based Financial Options - PPP, EIDL, UI, FPUC

The amount of financial options, and homework to understand the options, as well as the severely short timeline, has been extremely overwhelming for businesses. The Dutchess County Business Notification Network has been extremely helpful with highlighting daily changes.

UPDATE [4/17/2020]: Per a reader’s comments below, we have made the following note about the EIDL:
The Economic Injury Disaster Loan started with a requirement that if one was granted it, they could not apply for the PPP loan, but that changed, and businesses could apply for both. Additionally, part of the loan became an “advance,” whereas the first $10,000 granted to the business did not need to be repaid. See the SBA Economic Injury Disaster Loan Emergency Advance page here.

Independent contractors were scrambling on what to do, because they were also permitted to collect unemployment insurance, something which is not normally allowed, which also could include an additional weekly payment of $600 of Federal Pandemic Unemployment Compensation (FPUC). New York’s website to file for unemployment insurance deeply crashed, was rebuilt by Google, and is currently accepting applications. However, Melissa De Rossa (secretary to Governor Cuomo) today (Thursday 4/16/2020) stated during the Governor’s briefing, that there is a delay for applicants who are independent contractors, as they are a special circumstance and not normally accepted to collect unemployment insurance.

As for employees who had been collecting both unemployment insurance and Federal Pandemic Unemployment Compensation (assuming they got through the website and were approved), the weekly benefit could exceed what their previous paycheck may have been at a local business. Would the employee want to decide to stay with unemployment insurance? That could possibly cause problems for the business owner who needs to keep all staff on payroll in order to meet the terms of the PPP loan to not pay it back. Myriam Bouchard, MBA, a Certified Business Advisor with Mid-Hudson Small Business Development Center, clarified the timing of the usage of the loan: “The PPP is to be used from the moment the closing documents are signed. The employee cannot BOTH receive unemployment insurance and payroll from their employer.”

Local Impact Of The PPP Loan

The PPP loan was mandated to be processed through banks both small and large. This added a delay to the applications as banks of every size had to figure out how to process applications and avoid fraud. Banks opened to accept the PPP loan on different days. Local banks tended to open sooner than larger banks, since local banks, it was presumed, knew their customers better.

Homespun’s new owner Joe Robitaille had started applying for the EIDL and PPP loan from the very beginning, and has still not received an approval. “EIDL loan has not come through, was a far cry from what was initially offered, where they were saying they would be transferring $10,000 within three business days of application. That was three weeks ago that we applied. As for PPP, we have not been approved and the well is dry until Congress can agree on how to move forward. I’m really not sure what moving forward looks like for us. Feels like finding out the cavalry just isn’t coming after all. If they stall this too long, Beacon and lots of other towns are going to lose a lot of small businesses. Potbelly and Ruth’s Chris have secured $10 million and $20 million in PPP loan, respectively.”

A Little Beacon Blog happens to know that Homespun just got awarded with their liquor license, and with Joe’s big plans for wine, being that he was a sommelier, we are really hoping he can ride this out.

Accountants also saw a surge of activity from their clients, not only from those wanting to file their taxes by the original April 15 deadline, but from businesses who needed their business taxes filed in order to apply for the pandemic loans. “This is one of the busiest times in my life,” said local accountant Arthur DeDominicis to A Little Beacon Blog. “Everyone’s wanting their taxes filed, but they are also calling in with questions as they fill out the PPP application and banks ask them clarification questions.”

John Mitchell of Number Keepers, an accountant in South Carolina, was fielding questions from clients the day the local banks opened to applications on April 3, 2020: “Some banks are ready, some banks say later today, some banks are just taking general applications and stacking them. Some banks are not communicating anything online. Some banks, like Bank of America, are only taking applications from their business clients and you have to have account logins to even apply.”

Banks Are Standing By

Will the loan application process re-open? Perhaps.

Chase’s letter to business customers reads:

“Message from Jennifer Roberts, CEO of Chase Business Banking:

”As predicted, the SBA's Paycheck Protection Program was hugely popular. In fact, we have just learned the SBA has approved loans that will exhaust all the funding available for the initial round. By tomorrow (Friday, April 17, 2020) morning we will have notified all of our customers who received funding in the first round, and know many of you are disappointed, as are many other business owners around the country.

”We know Congress is currently considering another round of funds soon. In the interim, we will continue to work our existing queue of applications so we can be ready. We will continue to update you here.

”If you are among the many customers who have applied, we'll call you if we have questions and email you when we make a decision once additional funding is available.”

Another day begins tomorrow.

We shall see.