“It’s chaos,” said one lawyer 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.”
Coyote Ugly
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.
Fraud
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.
Also recall Stimulus Checks Delayed To Get Trump’s Signature On Them.
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?
Mish
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They are right to be afraid. Everyone knows I just moved from Oregon to Florida, back in early March I used Spectrum.com to transfer my service for phone, TV, and internet from the old address to the new, and mailed the equipment back to Charter Spectrum because they had closed the offices for that function, for the duration of Covid you have to mail them in by FedEx, and it is free to you, but you have no other option. And you also have to go to FedEx because they have special shipping packs with preprinted labels.
Well I am now at one month since closing on the house today and yesterday the property manager at the old place sent an email DEMANDING I contact Spectrum and close out my old account because the new tenants can’t start their own Charter services till I do.
Since they withheld (stole) about 600 bucks of my deposit I politely (well not exactly politely) invited them to please go instert that rental unit rectally and have sex with it. I did transfer my service a month before moving I set it up and I did all I can and am supposed to do. Sending me a nasty email because Charter did not do it’s part is NOT going to help.
Nevertheless I did call Charter Spectrum at 611 and waited on hold for about 95 minutes only to be told by the reprasetitive I was at the wrong place and could not be transfered, I had to dial 877 xyz-ious and so pissed but still under control I did that. Had to be done though as it appears I am being billed for two accounts.
HOURS!!!!! Later I finally spoke with Ashley who was cool and helpful, it was past 10 p.m. by then and I was really hot under the collar. No service industry can survive with customer services that bad. But till I can find an alternative I can afford I am stuck. And that is why all of us should be afraid to take bailouts and borrow to get through. You will still be held to all the rules and old standards even when the companies and agencies of government are simply not performing to the minimum standards of diligence. Like United Airlines telling people they are stuck with worthless vouchers instead of cash refunds for flights THEY cancelled. TFB yo did not call in to request one in the time alloted. Never mind the 7 plus hour hold times they force upon us knowing 98% of callers will hang up long before that, or phone batteries will have long since died.
That is but one example. I have the veteran’s admin for my healthcare. But pretty much the moment Covid was recognized as a pandemic they closed their doors, shut down, stopped seeing patients. I have to ask you what good is a HEALTHCARE system if it shuts down the moment people start getting sick? I am left basically without healthcare till this is all over.
WOW! If the business does not intend on using it for paying employees, utilities, etc, then the business should not have applied for it. Use the money strictly to pay the employees. Especially if they are working! And all is forgiven. That simple.
Use them to pay the employees even if they aren’t working. That’s the whole point of this program.
I really believe that it is up to the business to create a legitimate solution to this problem. Instead of dropping the ball and losing the funds. You should just transfer the payroll monies needed for your employees when they return. If it sits in the account untouched it will appear to be not needed.
It is perfectly legitimate and I believe that the government perhaps thought that the businesses would use their wits to figure it out. If not then, I’m believing that it will work. Be sure to only use it when employees return. For the time being they can apply for unemployment. If you are thinking about them not wanting to return because unemployment benefits may be more, put a little raise in for the return perhaps 8 weeks worth.
That way you won’t be penalized for not using the funds and your employees will be paid on their return.
Makes sense?😊
What i dont understand is why give out forgivable loans with cloudy rules etc. why didnt they just have them go on unemployment like everyone else. Where the rules are in place. Then help employers out once they reopened.
After bumping unemployment to far more than most small business employees make, PPP was a program to keep their employees off of unemployment. PPP is not intended primarily to benefit small business; the money simply flows through the small businesses to the employees. Small businesses do benefit a little, too, because they get to use a small portion of the money to pay rent, utilities, and mortgages, plus any revenue they take in during the 8 weeks has no labor expense to offset it.
The details of the rules aren’t complete clear, but the general rules are, and the spirit of the law is. You have to consider the PPP in light of the excess unemployment money. First the government makes it so if I lay someone off they earn 3x their normal salary. Then they give me money to give to them at their regular salary. It is much, much cheaper for the government if they have me pay the the employees for doing no work instead of having them end up on unemployment.
With that it mind, the intent is clear. The PPP loan is actually not a “gift” to small business at all, it’s a form of payment to employees that flows through the small business. Does the business get any benefit from it? Yes, a little. First, they can spend up to 25% of it on themselves, for rent, utilities. and mortgage payments. Second, any revenue they get during the 8 weeks is theirs to keep, with no payroll expenses. If there is no revenue at all,that doesn’t help a lot, but they still get the benefit of the money for rent, etc.
What am I doing? My employees have been getting 50% paychecks, approximately, and I haven’t laid anyone off. I told them that for the next 8 weeks they will get full paychecks, whether they work 3 hours a week or 15 hours a week or whatever. I computed their average pay for last year, and they will get paid the max of what they earn this year or their average pay last year. My headcount will be the same as last year. Since I am following the spirit of the law, and so far as I can tell, the letter of it, I expect the portion of the loan that applies to payroll to be completely forgiven. I own my own building, and have no mortgage, so the other 25% that is intended to benefit the small business itself will not benefit me much at all. It will pay my utilities, and that’s it.
So, if i get so little from it, why did I bother? I did it to help my employees. Having them get full pay for nothing will help them get through this. Laying them off, they would earn a lot more, but only until the benefits run out. After 8 weeks, we’ll go back to paying them for the actual hours, obviously, and those will most likely be less than a year ago, but for at least a little while, they will have full checks. Then, at the end of the 8 weeks, I will pay will need to pay back the remaining 20%, since I don’t have rents, etc to use it on, with and interest rate of 1%.
If people didn’t realize that the point of the PPP was for them to pay the employees for no work, they didn’t read it very well. That is exactly the point, and the reason it is good for government to pay the employees, using the small business as a conduit, is that it is cheaper than unemployment, by far.
“..the reason it is good for government to pay the employees, using the small business as a conduit, is that it is cheaper than unemployment, by far.”
Less sanguinely, it also helps keep pre covid ownership, wealth, hence powerstuctures intact. In the process reducing the flexibility of the economy to respond to a new reality.
It works much the same way as tying health care to ones employer. In your case (I have no idea what you are doing), it may not make a practical difference. But across the economy, programs which discourage flexibility, solely in order to entrench current structures and organizations, only ends up benefiting those who are currently arbitrarily advantaged; at the expense of scleroticizing the economy as a whole. From an economic efficiency POV, handouts need to be either completely agnostic of all things, including employment, or not at all.
After a dozen years of “recovery”.”… a “booming’ economy.hundreds of trillions printed..virtually everything in the US(literally)is bankrupt or completely insolvent,every state is broke,federal govt flat ass broke,corporations broke…..after a dozen (12) years of longest (lol)”economic expansion” in history!!!!
Don’t worry. The US is still the cleanest dirty shirt in the world, just like we are still the greatest country in the world. I mean how can it ever be otherwise right? USA, USA, USA.
A trillion here, a trillion there and pretty soon you’re talking quadrillions.
All I need are some tasty waves and a cool buzz and I’m fine.
I sit on the Board of a small company and we did get a loan, and are using it, while not fully understanding the rules. So for us it really helps. We are a small grocer and open. However to keep employees had to increase salaries – not sure how that will work for the long term but for the short term with the loan paying the salaries it is ok.
And a lot of increased costs to address Covid-19 health issues. I think being in a small state helped us get the loan.
It is not that business is fearful of the rules, it is that the American people are fearful of their government.
When the government fears the people, you have freedom, when the people fear government, you have tyranny.
There hasn’t been enough fear of tyranny, as witnessed by the lack of many law challenges to the shelter-in-place and forced business closings issued by every petty government official around. Where have all the Libertarians gone?
Why should a lowly unelected county “Health Officer” have the power to issue economic orders? Why should health officers (as a group of counties) be able to coordinate these actions and impose them across county boarders.
And then we can look at what powers individual governors have to do similar. Sheese.
The federal government response to this catastrophe has been so perfectly incompetent that a national tax revolution is 100% justified. WTF are we paying for?
Bailouts for the wealthy, so they can buy up our assets and rent them back to us. Been going on over 10 years, and just kicked into high gear.
Gonna be lots of people checking out of the system when the dust settles. I get that the America they sold us in school never existed, but this shit is bananas.
Rule of law is unraveling, as is basic decency and regard for other humans. The idea of America is all but over. I’m looking into emigrating, but the US will almost certainly drag the world down with it. China looks like it’s about to tip over too.
It was nice living through the peak, though. I think the late 90’s were it.
This was the Republican plan all along… shrink the federal government until you could drown it in the bath tub.
Public support for Medicare for all is running at close to 70%. Millenials are the most left-wing generation ever. Big change is coming- we just need to last through the tail end of the awful teabagger generation and the dying, flailing white nationalist movement.
When you guys rail about giving up on the federal government, you are playing right into the Republican game plan.
Story in a similar vein:
MAY 1, 2020 / 4:16 AM
For small business loan program, forgiveness may be the hardest part
WASHINGTON (Reuters) – The U.S. government’s $660 billion small business rescue program has stumbled on missing paperwork, technology failure, and the misdirection of funds to big corporations. Now, it is lurching toward another hurdle: forgiving those hastily arranged loans.
….
Some people took the “don’t touch the tar baby” story to heart.
Free people with a First Amendment Right of Free Speech do not necessarily have the right to yell FIRE! in a packed movie theatre.
Free people with a First Amendment Right of Free Assembly do not necessarily have the right to assemble wherever they please in the middle of a rapidly spreading pandemic.
I’m not a lawyer so take it up with those who are …
“Free people with a First Amendment Right of Free Speech do not necessarily have the right to yell FIRE! in a packed movie theatre.”
That is as irrelevant as it was when Oliver Wendell Holmes said it.
Free speech does not apply in a private theater.
what you are saying is you need better example?
Free people with a first Amendment Right of free speech do not necessarily have the right to yell BOMB! in Public crowded places.
You cannot threaten people. That’s the ‘limit’ of free speech. And ‘free’ movement.
You are free (or at liberty) to do what you want except violate the rights of others (duh).
And the more ‘others’ there are, the less you can do without impinging on somebody’s rights. Freedom and population density are inversely proportional.
You’re not violating anyone’s rights by voluntarily going out in the sunshine among those who are also going out voluntarily.
“Freedom and population density are inversely proportional.”
Bullshit. People in New York have the freedom to leave.
If you didn’t like my example, accept the example from indc … if you don’t like either take your arguments up against those contained in the link I posted.
Actually, the document you linked says the exact opposite of what you assert.
According to your link:
The government has the powers to Quarantine and Isolate
Isolation separates sick people with a quarantinable communicable disease from people who are not sick.
Quarantine separates and restricts the movement of people who were exposed to a contagious disease to see if they become sick.
Both acts have one thing in common: sick people. The government only has authority over those who are sick or exposed to someone who is sick.
If they know you are sick, they can force you into isolation. If you have been exposed to someone who is sick, they can quarantine you until they are certain you are not.
They have NO power over anyone else.
So yeah – people who are not sick or have not been proven to have been exposed to someone sick are – per the CDC – free to do whatever they wish including “peaceably assemble”.
RE: “Both acts have one thing in common: sick people. The government only has authority over those who are sick or exposed to someone who is sick.”
And with the characteristics of this disease, agreed to by all sides, including the known high levels of asymptomatic infectiousness, and the lack of testing, made it wise to assume that far more people were infected and infectious than just those who were symptomatic. And I believe it was far wiser to assume widespread infected and infectious as to act on that as the definition of “sick”.
If you want to insist on the definition of “sick” as being “symptomatic” as opposed to “infected and infectious” that’s certainly your prerogative.
I’m glad most state/local leadership wasn’t that foolish.
“I’m glad most state/local leadership wasn’t that foolish.”
A lot more people will die from something in states where people are prevented from going outside except in their back yards. Vitamin D – which you can get from sun – is vital to health, especially from the corona virus. Anyone who doesn’t at least check his levels is a fool.
I don’t really care one way or the other. I was merely pointing out that – as I said – the page to which you linked doesn’t support your assertions.
Because facts matter.
If you don’t like it, take your arguments up with the CDC.
Too many mixed motives here. Govt thought it had some kind of obligation because it required the public to obey stay at home orders. Free people with a First Amendment Right of Free Assembly thought they had to obey an obviously unconstitutional order. Two wrong thoughts are not adding up to the correct outcome.
“And when the loans run out and the rent is due. what then?”
And decent food is difficult to obtain.
That’s when the public will finally stop supporting the shutdown – which will be about a month before they also realize that the virus is not that deadly.
Half the people probably have it already. That includes those shut down and a lot of those who call beach-goers and people like me, ‘covidiots’.
Politics vs. Biology
Dimwits vs. Thinkers
Which side do you fall on?
“Politics vs. Biology”
Yeah, the so-called ‘liberal’ states are keeping everyone indoors and away from sunshine – but not telling them they need Vitamin D.
“Dimwits vs. Thinkers”
Yes, the dimwits are those who don’t don’t take any nutritional supplements, even when they’re in their late 60s like myself.
Yes it is OK to pay workers to do nothing.
“The FLSA doesn’t actually define what work is, but it does explain that “there need be no exertion” involved and that employers may even “hire a man to do nothing, or to do nothing but wait for something to happen.”
There was a case that went to court where the employer required a receptionist to eat lunch at her desk, but didn’t want to pay her because usually no one called. Since the employer required her to be at her desk, he had to pay her her time.
So that one is covered.
You’re correct. This company should pay its employees. That’s the purpose of PPP. I don’t see a problem. He can forfeit the money if he wishes. That that’s lose lose and stupid.
Finally, as I said before, another thing that both parties agree on.
So far both agree on the following:
Rent was yesterday by the way and so far, crickets. Whatever happened to those rental strikes, etc.
google “rent strike arrests”