Small businesses are being hit hard by the COVID-19 pandemic, as a Harvard survey shows that small business revenue in November was 32 percent less than in January. The last thing these struggling companies need is for the banking sector to capture aid funds designed to help them meet their payroll.
Unfortunately, this is what Congress is doing in COVID’s latest relief bill, which rewrites the Payment Check Protection Program (PPP) after the fact to help banks at the expense of small businesses. In essence, Section 340 on page 2202 (hidden at the bottom of the account to avoid scrutiny) transfers the paying agent fees from banks that are supposed to pay small business agents, which help companies obtain and meet PPP loans, to themselves small businesses that had not planned this extra expense.
Previous legislation explicitly mandated banks to pay these fees, not small businesses, because loans are aimed at reducing the costs of small businesses. Forcing entrepreneurs to repay these loans out of their own pocket undermines PPP’s intent and hurts companies that can barely stay open.
At first, this change seems insignificant, but it will cost small businesses $ 3.7 billion in fees. Congress is being captured at the 11th hour by special interest groups that want to fill their pockets at the expense of entrepreneurs who cannot spend millions in lobbying.
Large banks are corrupting the legislative process and jeopardizing the livelihoods of many small business owners. Entrepreneurs who struggled last year to stay afloat because of COVID-19 restrictions may finally be swept away by this shameful legislative change.
It is unfortunate that Congress is interrupting the PPP, which is one of the most successful programs of the CARES Law passed in March. Congress is recognizing the importance of the PPP, replenishing the program with $ 300 billion in additional aid funds to help companies survive in the coming months until the COVID-19 vaccines are fully distributed.
This year, PPP has allocated more than five million forgivable loans worth approximately $ 500 billion, saving more than 50 million jobs. The survey shows that up to 84% of small business employees remained employed at least in part because of PPP.
PPP funding needed replacement because of its great success and because the next few months will determine whether many small businesses will survive this pandemic. The vaccine is unlikely to be available until late spring or early summer, and many states are tightening blocking restrictions because of the recent increase in cases. A final round of PPP financing will ensure that companies on the brink of insolvency will survive until full reopening.
The latest bill also makes it important to note that all PPP loans are tax-deductible, in addition to being forgivable if companies use the loan to maintain their workforce and meet certain conditions. Adam Looney of the Brookings Institution says that this change saves about $ 200 billion for small businesses, while simplifying the tax filing process.
Without these loans, a sustained economic recovery would have been difficult to achieve. According to Yelp, 163,375 businesses have closed since March, and the National Restaurant Association says that one in six restaurants has closed permanently across the country. The PPP prevented these numbers from being even greater and the continued relief will set the stage for a rapid economic recovery.
The extremely positive impact of the PPP on our economy makes Congress’ offer to the banking sector particularly frustrating. Changing a program to help small businesses to help banks is an excellent example of uncontrolled policy. Hopefully, the public outcry will force Congress to get rid of this Wall Street offer and focus on helping Main Street.
Alfredo Ortiz is president and CEO of Job Creators Network.