The Paycheck Protection Program (PPP), the small business loan program established by the coronavirus stimulus package, has been plagued with problems including a lack of funding and unclear guidelines that allowed big corporations and even well-endowed private schools to apply for aid.
On Saturday, The New York Times reported on another big problem with the program: Many small businesses are so confused by the federal rules that they aren't even spending the money, for fear they'll break the law.
"Many of the small businesses that did get loans are sitting on the money, unsure about whether and how to spend it," reported Stacy Cowley, Emily Flitter, and David Enrich. "Some owners don’t see the point of hiring back workers when business is so slow. Others chafe at having to use the money within eight weeks, when they would like to keep the financial cushion for longer. And many of the owners are confused about whether they have any flexibility. They would rather use the cash to retool their operations for an altered world or buy protective equipment for workers, but the rules require them to spend it on specific expenses, like payroll."
One of the people paralyzed by confusion, the Times reported, is Jody Burns, who owns Blazing Fresh Donuts in Guilford, Connecticut.
"Ms. Burns could use the loan she got — an amount under $50,000 — to hire back her eight employees, but she would be paying most of them to stay home, since the bakery is open only 12 hours a week these days," said the report. "She would prefer to hold on to the cash beyond eight weeks; her hope is that it becomes a low-interest loan she can use for payroll and rent when her shop is open longer ... [but] having signed documents requiring her to use the funds for purposes allowed under the paycheck program’s rules, Ms. Burns is nervous about misusing them."
“I don’t accidentally want to commit bank fraud,” she told the Times.
According to the report, "Many lawyers are telling small-business owners that they think the loans can be used broadly," and any use of the funds that serves "the operating expenses of the business" is legal. "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.'"
You can read more here.