Back in late March, or roughly a 100 years ago in coronavirus time, Congress passed and President Donald Trump signed the Coronavirus Aid, Relief and Economic Security Act, otherwise known as the CARES Act. The massive heft of this $2.2 trillion stimulus package was matched only by the velocity at which it was passed through bureaucratic channels. Remember the halcyon days when we were worried that Congress wouldn’t read a bill until after they passed it? For the CARES Act, they would need to write it after they passed it.
Yet the size and speed of this aid package was a feature, not a bug. We were, after all, facing an unprecedented shutdown of our national economy. Commerce ground to a halt through executive fiat brought on by a burgeoning global pandemic. Unemployment hit Great Depression levels. Swift, colossal action was required.
The CARES Act largely delivered. It provided for, among other things, $300 billion in direct payments to citizens, $260 billion in increased unemployment benefits, and the creation of the $670 billion Paycheck Protection Program (PPP).
PPP was a particular bright spot. Some 4.5 million small businesses received over half a trillion dollars in non-recourse, forgivable loans. It’s important to note here that, per the federal government, a business is deemed “small” if it has fewer than 500 employees. Many of those loans were able to be doled out by mid-April, and by June the entirety of the aid package was distributed. The speed was breathtaking, and more than a little frightening.
To expedite the loan process, the Small Business Administration utilized existing private lenders. In most cases, that meant that a small business would coordinate with their local banker, someone with whom they already had a banking relationship. The banks moved mountains to facilitate this huge undertaking. At this point in time, back in the early days of the pandemic, the goal was simple – get working capital into the hands of the business owners or we would face a mass extinction of small business the likes of which we never even imagined.
Fast forward a few months (or a few decades if you are using coronavirus math), and the bill for all this largesse has come due. PPP loans were intended to be forgivable if used for approved expenses such as payroll and rent. The trick is that small businesses are now burdened with proving that they used the money in the intended manner. Local banks are now burdened with the fiduciary responsibility of verifying that usage on some 4.5 million loans. The IRS and accountants are still haggling over the tax impact of the loan proceeds and, oh yeah, Congress is still making changes to the law itself. What could go wrong?
Enter the Paycheck Protection Small Business Forgiveness Act. This act, currently co-sponsored by some 30 senators from both sides of the aisle, might lack a clever acronym but it has a mighty mission. Essentially, the act would streamline forgiveness of all PPP loans less than $150,000. Loans of this size account for more than 85% of PPP recipients, but only 26% of the money. Here in Missouri, 87% of all PPP loans were for less than $150,000. This simple change would save the smallest of small businesses some $8.4 billion and save banks an additional $2 billion in compliance costs. The act does not let small business off the hook for the money they received, it simply streamlines a very cumbersome process and enables banks to focus on the higher dollar loans. It is a rare and elusive win-win scenario at a time when those are hard to come by.
If Congress really wants to show that they care, they will pass the Paycheck Protection Small Business Forgiveness Act with the same speed and decisiveness that they shut down our economy. Sen. Roy Blunt (R-Missouri) is one of the co-sponsors of this bill. We urge you to write him a letter and let him know that his constituents support this bill as well.
(Publishers note: Mid Rivers Newsmagazine received a loan under the Paycheck Protection Program.)