On Monday morning, the second round of funding for the federal Paycheck Protection Program (PPP) was made available for small businesses unable to secure a loan when the program went live on April 3, then ran out of funds less than two weeks later. Co-authored by Maine Sen. Susan Collins, the PPP has been a scandalous disaster from the start: poorly resourced, severely limited in availability and oversight, and prone to abuse on a massive scale, as evidence continues to show wealthy companies are soaking up millions intended for struggling mom-and-pops.
As Mainer reported earlier this month, business owners forced to close or severely limit operations to help contain the spread of COVID-19 worried they would not be able to bring their full staff back to work within eight weeks of receiving a PPP loan (the end of June, for those lucky enough to get in on the first round). Businesses that spend at least 75 percent of the loan money on payroll, and maintain staffing and pay levels during that two-month period, will have their loan entirely forgiven. Otherwise, it becomes a major debt that small-time proprietors must shoulder while trying to climb out of a deep financial hole.
This problem with the PPP’s rules gotten a lot of attention, thanks in large part to Mainers like Joe Walsh, owner of Green Clean Maine, who explained this predicament to numerous local and national news outlets in interviews this month. And some lawmakers were listening.
In an April 16 letter to House Speaker Nancy Pelosi and House Minority Leader Kevin McCarthy, Congresswoman Chellie Pingree, who represents southern and midcoast Maine, urged that the eight-week deadline be extended “by at least five months,” in order to give business owners more time to hire back staff and thus meet the requirements for loan forgiveness.
This extension, “for which there also appears to be bipartisan consensus,” Pingree wrote, “is particularly important in states like Maine with seasonal industries like restaurants and hospitality businesses that are heavily dependent on summer customers, and with agricultural sectors that are beginning to plant now and would be normally increasing their labor over the next month.”
But when the latest round of PPP money was approved last week, the program was essentially unchanged. Collins managed to convince Treasury officials to tweak the PPP formula by which certain businesses calculate their payroll expenses, enabling farmers and other seasonal operators to take out larger loans, but the eight-week deadline to rehire everyone remained intact.
Making matters worse, on Tuesday afternoon Maine Gov. Janet Mill announced that restaurants, fitness centers and retail shops may be able to reopen, under new public health guidelines, no sooner than June 1. Bars and tattoo parlors and other “personal service” businesses may be able to open beginning in July.
Mills’ plan also extended an order requiring anyone entering Maine from another state to self-quarantine for 14 days, which means any business that heavily relies on tourism — and Maine has more of these than most states — is doomed, since most visitors spend far less than two weeks in Vacationland. Her timeline forecasts that this restriction might be eased in early September, which is traditionally the end of Maine’s tourist season, but no estimated date has been set.
Under the best-case scenario, shuttered restaurants and stores that received PPP loans earlier this month may only have to pay back half of their loan, assuming they rehire nearly all their staff and pay them to work for four weeks in June. Those who get a loan during this second round of funding will have only a few weeks in July to gear up to full speed in order to have any portion of their debt forgiven.
“Keeping your employees, rehiring, that’s not working,” said Linda Homer, who closed her Pilates studio in Southwest Harbor in mid March. She cited another glitch in the PPP rules Collins wrote: laid-off workers receive more in combined state and federal unemployment benefits than they stand to earn if they go back on their employer’s payroll to help the boss meet the loan-forgiveness requirements. “I know people that just want unemployment instead, but now are tied to their employers, which puts them in a bad position,” said Homer. The PPP is “not helping anyone, it’s tearing us apart.”
As a sole proprietor, Homer was unable to even apply for a PPP loan until April 10, a week after the first round started. The funding dried up a few days after she was eligible to submit her paperwork.
Mary Allen Lindemann, co-founder and owner of Coffee By Design, which operates cafes in Portland and Freeport as well as a booming wholesale business, has also been flummoxed by the eight-week PPP restriction.
“How do I ask 48 full-time people to come back (the number we are required to [re-employ]) within eight weeks, now seven and counting, when a stay at home order is in place and other restrictions will continue so we are not able to grow the business to support the payroll after,” Lindemann wrote this evening on Facebook. “How do I compete with what is now a lucrative unemployment package?”
To Mills’ credit, she’s made it clear that her orders restricting commerce and travel are based on public health data and the recommendations of epidemiological experts. It’s unclear why Collins structured the PPP the way she did, why she refuses to make the improvements her constituents are requesting, and why she didn’t foresee the many problems the program has caused.
For example, among the largest group of recipients of PPP loans in Maine were law firms. “I never expected law firms to be applying,” Collins told a right-wing talk-radio host in Maine last week. She said the fact those firms have taken a huge share of Maine’s PPP funds “bothers me terribly,” but apparently not enough to prod her to prevent that from happening again in this round. (Collins’ office did not respond to Mainer’s request for comment on any changes to the PPP that she advocated.)
“I don’t believe that we will get anything, unless it’s in the bank,” Homer said. “There are just too many loopholes, especially for sole proprietors. We have just been left behind. That much is clear.”
In an April 26 article, the Maine Sunday Telegram reported that one global economic-forecasting firm, Oxford Economics, predicts that Maine will take a bigger financial hit than any other state, in part because of its “high percentage of small businesses … and dependence on tourism and retail activity.”
“So much of Maine is small business,” Homer observed. “And we’re collapsing.”