While many small businesses receive funds from the federal Payroll Protection Program, there is still a lot of confusion about how the funds are regulated and potentially forgiven.
Jim Carroll III, executive director for the Hampton Roads Small Business Development Center, said when the program was first announced in April, the guidance was still in the works for the rules and regulations associated with the program. Now nearly two months later, small businesses are still receiving changing guidance on what forms and procedures to take when applying.
The Payroll Protection Program was designed as a loan to provide small businesses with funds to maintain workers on their payroll, according to the Small Business Association. The loans will be forgiven if all the employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest or utilities.
But Carroll said there is still a lot of confusion about how to have the loans forgiven and businesses are worried that if they don’t “dot their Is and cross their Ts,” then they may not be forgiven.
“So everyone who has loans, didn’t know what was coming down the line and now we’re in the process of digesting the information,” he said. “And there’s a level of uncertainty knowing what records you have to provide to meet that criteria.”
During the first round, the federal government loaned out $349 billion in just a little less than two weeks. The federal government is in the process of issuing more PPP loans during its second round of funding.
“The first [$349 billion] was gobbled up,” Carroll said. “When the initial loans came out, people were rushing to get them…but now people are asking if I’m paying people but my business isn’t open, then is there an issue?”
Some businesses have been wondering if the term can be extended beyond the initial eight weeks because businesses have only just started to reopen Virginia, which means they haven’t had an adequate amount of time to create necessary cash flow.
There’s also no way of knowing just how long the financial impact will last. Carroll said unlike with a natural disaster that creates physical damage, the pandemic has caused psychological damage which will impact businesses for an undetermined amount of time.
“That’s what we want to emphasize right up front,” Carroll said. “We don’t know what we don’t know. And we want business owners to understand the marketplace has gone through a tremendous shift. The psychological devastation is immeasurable.”
There have also been a lot of concerns about the unknown aspects of the program from small business owners.
Robby Willey, a member of the Williamsburg Economic Development and co-owner of the Virginia Beer Company, said the program has its ups and downs especially after the first round of loans were given.
“It was really difficult to determine as a small business owner that we needed this money to survive but if the government keeps changing the regulations, how do we make sure we’re still going to get what we need,” he said.
While there is now more evidence of how the loans are processed, there is still a level of uncertainty for how they’re forgiven.
Willey said it’s become extremely important for these small businesses to stay educated on the loan they’re receiving by relying on advisers and working with their local economic development and chambers. He said when it comes to being prepared and understanding the loan, it’s all hands on deck.
“[The loan] is a risk and it’s a consideration you have to have in the front of your mind at all times,” Carroll said.
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