"It's chaos," said one lawyers as Small Businesses That Got Aid Fear the Rules Too Much to Spend It
Consider the plight of George Evageliou, the founder of a custom woodworking company. Last month the SBA awarded him with a $192,000 loan
Under the rules, he has 8 weeks to spend the money. For the loan to be forgiven, he has to pay salaries. But his business is closed.
Evageliou, and other businesses are fearful of paying workers money to do nothing.
The government has “made this so hard to use, it starts to feel like a lose-lose situation," said Evageliou.
Owners also say they are afraid of running afoul of the program’s rules, which are complicated, ambiguous and still evolving. Accountants, lawyers and lenders are struggling to understand the nuances and offering clients tentative guidance.
“It’s chaos,” said Howard M. Berkower, a New York lawyer who advises corporate clients. “It’s impossible for businesses to have any degree of comfort that they’re following the rules when the rules are still being written.”
Clarification From the SBA
“As long as they’re using the funding for the operating expenses of the business, our interpretation — and we think it’s clear — is yes, you can use it as effectively a working capital loan,” said John Asbury, the chief executive of Atlantic Union Bankshares, a community lender in Richmond, Va.
But officials at Treasury and the S.B.A. won’t confirm that interpretation. Asked repeatedly if companies can simply hold on to the money for now because paying employees doesn’t make sense to them, an S.B.A. spokeswoman would say only that the funds must be used for purposes “consistent with the Paycheck Protection Program.”
The owners of bar chain Coyote Ugly received a grant ranging from $40,000 to $120,000. The workers were more than a bit upset when they were all furloughed.
But what's the point? That money would all have been exhausted in a few weeks or less. and bars are still closed.
Hundreds of thousands of dollars remain deposited in Coyote Ugly’s bank accounts, unused.
Is paying workers for doing nothing fraud?
No one seems to know, and besides, what good would it have done anyay?
Small Business Guarantees Are a Bucket of Moral Fraud
On April 9, 2020 I wrote Small Business Guarantees Are a Bucket of Moral Fraud
That idea did not take too long to prove.
And as long as it is OK to pay workers for doing nothing, we may as well start Trump's New Idea: Pay Drillers Billions to Leave Oil in the Ground.
And when the loans run out and the rent is due. what then?