Former CKE Restaurants CEO Andy Puzder talks about small businesses, coronavirus blocks, jobs in the hospitality industry, and Joe Biden’s choice of job secretary.
The Pay Check Protection Program, a vital lifeline that helped keep small businesses devastated by the pandemic afloat, was reopened to candidates on Monday with several major changes implemented to eliminate fraud and abuse.
In an attempt to rectify earlier criticism that the program favored larger borrowers, the bailout fund – which provides businesses with forgivable loans if they keep their payroll – will initially be available only to the first borrowers, with applicants who seek eligible for the second time Wednesday, according to new guidance from the Small Business Administration and the Treasury Department.
The federal government will also give priority to companies belonging to minorities in the first two days of the program, accepting only loan applications from certain creditors that focus on needy communities. Although the federal government supports loans, the money is issued by financial institutions such as banks, credit unions and community creditors. Most of the creditors who participated in the previous rounds are expected to do so again.
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“This updated guidance improves the targeted relief from the PPP to small businesses most affected by COVID-19,” Treasury Secretary Steven Mnuchin said in a press release. “We are committed to implementing this PPP round quickly to continue supporting small American companies and their workers.”
Congress established the rescue fund earlier this year with the approval of the CARES Act in late March. Lawmakers authorized an additional $ 284 billion last month to provide a second round of forgiving loans to small businesses as part of their more comprehensive $ 900 billion COVID relief plan, bringing the program’s total financing value to US $ 806 billion.
At least $ 40 billion has been set aside for companies with 10 or fewer employees and for loans under $ 250,000 in low-income areas.
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The re-launched program is expected to inject much-needed relief into the U.S. economy after employers unexpectedly cut 140,000 jobs in December amid a nationwide increase in COVID-19 cases.
Although the eligibility formula is the same for first-time applicants, only companies with 300 employees or less are eligible to receive a second loan, which will be limited to $ 2 million. Borrowers seeking a second forgivable loan also need to prove that they saw a 25% reduction in gross revenues during a quarter in 2020 compared to the same quarter in 2019.
Borrowers who are taking out loans of $ 150,000 or less will not have to immediately provide documentation proving a 25% reduction in income and can do so before applying for forgiveness, according to the rules.
During the first round, companies with fewer than 500 employees could receive up to $ 10 million.
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Companies will still have to spend at least 60% of the money on maintaining payroll for the government to forgive the full loan. The remaining 40% can be spent on operating costs, such as mortgages, rent and utilities.
At the beginning of the program, he was severely criticized for giving aid to publicly traded companies that had other avenues of relief – even when small businesses languished. The SBA and the Treasury Department, which jointly administered the program, struggled to close the loopholes that allowed multimillion-dollar companies to use the fund, including the promise to audit any loan worth more than $ 2 million.
Over the course of about four months, the PPP distributed about $ 525 billion in forgivable loans to 5.2 million companies, saving about 50 million jobs, according to the SBA. The program closed for new applicants in late July, with about $ 38 billion remaining in the fund.
The program is expected to close for all borrowers on March 31.