Update: 10.2 million PPP loans were forgiven. Here's why.
> If borrowers use at least 60% of the loan to cover payroll within 8 or 24 weeks after receiving the loan, they can submit an application to have the loan forgiven.
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edit: if anybody can clear this up for me, I'd appreciate it, but what could it possibly mean for "at least 60% of the loan to cover payroll?"
Does that mean that the company has to spend its way into insolvency first, then after becoming insolvent pay out 60% of the loan to employees, or does it simply mean that an employer's payroll has to sum to at least 60% of the loan within 24 weeks, no matter how much cash the employer has?
It seems like the difference between 1) handing out gifts to employers of up to 40% of their 24-week payroll, or 2) handing out gifts to employers that are up to 166% of their 24-week payroll. But I'm not a math scientist.
Either way, making direct cash payments to employers in proportion to their payrolls is as stark an example of welfare for the rich as you could cite. That's like paying money to people in proportion to their total stockholdings, as long as they promise to spend at least 60% of those payments to buy more stock. Even worse in the execution, where tons of the smallest employers and the self-employed were left out in favor of companies with high-powered accounting firms or lawyers on staff.
There were limits on what you could spend the other 40% on (defined categories of expenses). You could spend 100% on payroll if you wanted, but it had a minimum of 60%. The other 40% had to be used for specific things such as building maintenance, etc... No owner could take a distribution of these funds (directly at least, although if this loan allowed them to be profitable they could of taken those profits).
Businesses that wanted to be legit put this money into a specific account (in their accounting system) and tracked all expenses against that specific account for auditability.
The only loans that had less strict rules were for sole proprietors/self employed businesses. But the size of the loan was capped pretty low relatively.
Of course this program was highly flawed. But it was thrown together quickly in response to the pandemic. Personally I wish our government would already have plans in place ahead of time so everything wasn't done so hastily and last minute causing massive fraud.
What I'm trying to figure out is if they had to spend their own money before spending the loan. Otherwise it's strange to say that the money went to either payroll or "specific things such as building maintenance." The money went to the employer, and in return they wouldn't lay off so many employees that their 24-week payroll would fall below 60% of the amount of the loan (and a possible requirement that they'd have to spend the difference between the amount of the loan and the 24-week payroll on capital improvements?)
Did they at least have to prove that it would be financially beneficial for them to do layoffs?
> Of course this program was highly flawed. But it was thrown together quickly in response to the pandemic.
Eh, this isn't a deep dive, these are basic questions about the concept. Not that a deep dive wouldn't be warranted with tens or hundreds of billions at stake.
The flip side of this is that if the loans weren't given and everybody is closed for lockdown, companies are either firing everybody or going out of business.
If that had happened, all of those people would have been applying for unemployment, COBRA, Obamacare plans, Medicaid, etc as well. It was more a question of which Federal accounts to drain. By giving businesses a clear path to making sure they could keep paying people regardless of whether money was coming in from customers, that was avoided. In order to get business owners to take it though, you had to basically give it to them.
It was highly variable which businesses could find a way to keep operating in the conditions of lock down and COVID protocols. Remote work was easy. Running a bar was not.
Even then you also had exorbitantly high unemployment payments for a long period of time. It wasn't as if the PPP loans were the only money being injected.
I'm asking specifics, you're giving me ideology. Unless you have some evidence that people had to prove that they would it would be more profitable to layoff/close unless they got the loan, which is what I've asked.
> If that had happened, all of those people would have been applying for unemployment, COBRA, Obamacare plans, Medicaid, etc as well.
If we don't prefer direct aid over middlemen, why don't we route all social programs through middlemen? I'd like to volunteer, as long as I'm allowed a 40% cut off the top.
I have no objection to the government sending money to people who were made unemployed by covid. I have little objection to the government propping up marginal businesses that serve a valuable purpose in better times, but would otherwise fail during covid without aid, although I feel it was largely a landlord subsidy.
There were lockdowns for 2 weeks. Any customer facing business that couldn’t have customers walking in to do business was going to have no income for at least that long. If you don’t have income, there’s no money for expenses like payroll.
Unless you operate an extremely high margin business, your only options are to not pay staff during that time or to have layoffs.
Most small businesses aren’t high margin.
As for middlemen, given the short timeline what were the real options for the government? Setup a channel where every individual could apply for direct relief or use existing heavily regulated channels through banks?
Keeping the economy moving needed to be the top priority, so existing channels made more sense.
We applied for a loan at our small business. We worked with our accountant and banker to make sure everything was handled properly and then documented everything so that we could apply for forgiveness. We didn’t have any issue since our staff had grown by a couple of positions from the prior year.
Even though revenues did take a hit, the temporary allowance for telepractice options helped to lessen the overall impact.
If not for the PPP loans our business and a lot of others like it would have been staring down bankruptcy and layoffs for about 30 people. And we run a tight margin business.
I can’t say that there wasn’t fraud in some places, but for us it worked exactly as intended.
The combination of PPP with high unemployment payments that lasted much longer than needed pretty well spread things around. Both of them had an impact on the overall economy.
In hindsight, we probably would have been best off by just having people take precautions and avoid lockdowns entirely. Hopefully we will learn from the mistake.
To get your loan forgiven, you had to take a loan and show documentation of having spent loan amount of dollars on qualified expenses. There is no "must prove you were saved by the loan" requirement.
As for certifying whether your business needed it or not you had to make a statement saying it was necessary for you to continue the business on the loan app. But it was an honor system. It will be up to the government to search out & prosecute fraudsters.
Update: 10.2 million PPP loans were forgiven. Here's why.
> If borrowers use at least 60% of the loan to cover payroll within 8 or 24 weeks after receiving the loan, they can submit an application to have the loan forgiven.
-----
edit: if anybody can clear this up for me, I'd appreciate it, but what could it possibly mean for "at least 60% of the loan to cover payroll?"
Does that mean that the company has to spend its way into insolvency first, then after becoming insolvent pay out 60% of the loan to employees, or does it simply mean that an employer's payroll has to sum to at least 60% of the loan within 24 weeks, no matter how much cash the employer has?
It seems like the difference between 1) handing out gifts to employers of up to 40% of their 24-week payroll, or 2) handing out gifts to employers that are up to 166% of their 24-week payroll. But I'm not a math scientist.
Either way, making direct cash payments to employers in proportion to their payrolls is as stark an example of welfare for the rich as you could cite. That's like paying money to people in proportion to their total stockholdings, as long as they promise to spend at least 60% of those payments to buy more stock. Even worse in the execution, where tons of the smallest employers and the self-employed were left out in favor of companies with high-powered accounting firms or lawyers on staff.