The new PPP guidelines provide life support, but many more may be required

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Published on 6/18/2020

The coronavirus pandemic caught everyone off guard. We had a Government who initially failed to acknowledge the spread of the deadly virus in the country. By the time curbs were put, the damage was already done.

The damage was not only in terms of lives lost but the fact that despite being the most developed nation, the U.S. has now become the worst-hit country by the virus. The U.S. continues to record high deaths with a healthcare system shot down.

The cumulative effect of the circumstances led to an economic shutdown with millions filing for unemployment and thousands going bankrupt overnight. While many states have now lifted curbs and have resumed commercial operations, it could take a sweet time for the economy to rev back up in motion and steer the Americas out of what has become a mess.

PPP Act: An attempt to save small businesses

The Paycheck Protection Program Flexibility Act came in as a rescue under the CARES Act. The PPP Act underlined a rainbow of measures worked out by the Treasury Department to help Americans endure the economic blow by the coronavirus pandemic. The most prominent instrument under the PPP Act was the loan forgiveness feature.

The PPP Act would guarantee loan waivers for businesses worst affected by the pandemic. The focus was mainly on small businesses. On the other hand, many small businesses would also receive particular loans to help revive their businesses and rehire employees.

Amidst loan waivers, the PPP Act also laid out extraordinary measures that were being taken by the IRS, which included stimulus payments to millions of Americans.

The Federal Government laid out all its cards in front of taxpayers to show what benefits are being given. And not everyone was happy.

Failure of the PPP Act

The Act was passed in a hurry. Bankers were confused about how to begin the process of its implementation. Transfer of benefits to the extreme bottom was not smooth. The rules for loan forgiveness were not laid out for banks.

If that was not enough, the funding added to the woes of the taxpaying American who’s future seemed bleak. With the implementation of the Act, news broke out about how the funds for loan forgiveness worth $349 billion was exhausted—all in a matter of 14 days.

The small businessman with bills to pay and food to put on the table has all good reasons to become enraged due to this.

Adding fuel to the fire, controversy sparked in the market about how larger firms had immorally and illegally benefitted from this. The funding that was amassed for the needy was distributed to honchos with secure networks and contacts.

While the elusive nature of PPP was explicit by now, small businesses that received the payment to help them revive back felt like they were being pushed into a trap. The guidelines issued by the Treasury Department laid out tricky details in its fine print which added to the confusion. The circumstances seemed layered in nature. If economists and bankers tried to answer one question, it brought to light many others.

Re-working the PPP guidelines

When the second tranche of funding for loan waivers was about to be released, the Treasury Department reworked many features of the PPP Act per people’s demands. The new guidelines published in early May hinted at ease of revival for business for many small vendors. The new set of rules were much more adaptable, and the new deadlines seemed more manageable.

The Paycheck Protection Program received another influx of $310 billion. This funding was to be used for both loan waivers and helping small businesses spruce back to their feet. As of June first week, the Small Business Administration (SBA) still has more than $120 billion in its kitty- money that is meant for loan waivers for small businesses.

So, why are small businesses still in agony?

Because the money is not being released for them, while the number of loans forgiven and payments made in the first round were glaringly high, the second round has not seen as many beneficiaries.

Surprisingly or not, the SBA is refraining from divulging any details on the matter. All this, amidst the latest survey conducted by the Save Small Business Coalition suggesting that 1.2 million small businesses could pull down their shutters by September 2020. Other related figures are haunting and can put any small business owner under sleepless nights.

Working out the numbers has most definitely been a tedious task for the Treasury and the Federal Government. In the struggle between associations, banks and the authorities, it is the common pax paying citizen who is overlooked. A small dress shop owner, a garage owner, florist at the corner and countless others are angry. Angry about the last dollar being taken away from his bank account as taxes and no relief being given in the time of actual crisis.

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