PPP forgiveness has some businesses hesitant to apply or spend

May 26, 2020


Though roughly $100 billion remains for Paycheck Protection Program loans, businesses aren’t rushing to apply as Congress continues to wrangle about more changes to loan forgiveness.

That’s a crucial component. The money is meant for paying employees and overhead within a set period of time and adherence to the details determines whether the small business owner has the entire amount forgiven or has to repay the loan to some degree at 1 percent interest. While the terms are generous, for businesses slammed by the Covid-19 pandemic, free money was the draw. How to get it continues to evolve.

The U.S. Small Business Administration, which manages PPP, released its application for loan forgiveness last weekend. But even bankers still have questions.

"We do, because it's up to the third party and the third party is Uncle Sam," said Jack Barrett, president and CEO of First Citrus Bank. "The government can do what they want, but at the same time the intent of [the PPP] was that it would be a grant."

First Citrus is the eighth-largest community bank in the Tampa Bay region, according to the 2019 Book of Lists. The bank did $64 million in PPP loans during the first, $349 billion round of funding that launched on April 3. Applications are still being accepted but the flow has slowed dramatically during the second round, which started on April 27 with $310 billion in funding. 

Barrett said some larger businesses were reluctant to apply because of the government's recent promise to crack down on companies that applied for the loan despite having sufficient liquidity. Others were hesitant to apply or spend the money because they were concerned about uncertainty surrounding the program's future.

"There's a lot of moving parts and the government is frequently changing the terms and conditions of forgiveness, which is creating a lot of uncertainty as to whether or not they'll get payrolls forgiven," he said. 

Reportedly, one of the sticking points for Congress is the time recipients have to spend. Originally, businesses were to use the money in eight weeks. But that might not be possible for some businesses.

Mike Dodaro is the owner of Mike's Pizza and Deli, which has locations in Largo and Clearwater. Dodaro receive PPP funding through Achieva Credit Union after he was unable to receive one through his primary bank for business, Wells Fargo. Dodaro was able to bring almost all of his employees back — a few of them opted not to return — but revenue has not returned to pre-Covid-19 levels. 

"People who work at companies near us — Tech Data, Raymond James, Franklin Templeton — most of these people are working from home," he said. "We're hoping everything comes back ... because I can't keep payroll at the volume that it is."

Nonetheless, Dodaro said he was grateful for the money.

"We're very thankful for it," he said. "I wouldn't be talking to you right now without it, because we were down to the nitty-gritty."
 
Click here to view original article in the Tampa Bay Business Journal
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