PPP and EIDL: What Happens After the Loans? Reopening After the Pandemic.

Phase 2 of PPP is almost exhausted and EIDL processing has slowed to a crawl. Many business owners have either received their funding or have had to come to grips with the fact that they aren’t going to receive it. So, what are the next steps? What do business owners do after the pandemic?

First: EIDL. Is It Even Worth Still Waiting For?

Presently, only a few hundred EIDL applications are even being processed on a daily basis. At the current rate, it would likely take twelve years to process the backlog. Many people have already essentially been declined (they’ve spoken to representatives and been told their loans were declined). But they’re still in the system, still processing, and still waiting. It’s very possible they will pick up after PPP has been depleted. The portal has just reopened, with a focus on agriculture.

While an EIDL loan is the deal loan for many businesses, they simply cannot rely upon it. There’s no established timeline for getting these loans cleared. Some people have had documents waiting for weeks, signed, with no date of funding. Others have inexplicably acquired grants but experienced radio silence otherwise. So, while people should still be pursuing EIDL, they also need to explore other options.

PPP: It’s More Complicated Than It Seems

PPP launched with fairly simple outlines, but they’re still being clarified. For instance, it wasn’t clear how independent contractors and sole proprietors were going to be treated, but new guidelines have been released. Business owners need to be careful about how they use their PPP.

For most business owners, the requirement is that 75 percent or more be spent on payroll during an eight week period. Business owners need to be careful about this; some paid their employees in a lump sum, and no one knows whether that’s going to be allowed. Others paid their employees back pay for the past two months, and no one knows whether that’s going to be allowed.

“Forgiveness” needs to go through two stages: the originating bank and also the SBA. And because no one knows how strict this is going to be, it’s better to err on the side of caution. That means creating paper trails and ensuring that you’re using your PPP for the right reasons. If you can, make sure to keep your PPP in a separate bank account, and track everything you use it on carefully.

It’s also very unlikely that anyone applying now for PPP is going to be able to get it because funds have been so thoroughly exhausted and the wait lists are so long. However, it should also be noted that a glitch with the SBA has made it so that many people were approved for PPP two or three times, which could also influence the numbers.

Being Denied PPP and EIDL: Your Alternatives

Businesses were required to certify that they couldn’t acquire other types of funding before even applying for disaster funding. But it’s understandable why some may not have even tried yet— it’s emergency funding. The EIDL in particular was supposed to be able to send relief to business owners within a few days. So it can be argued that business owners could not have received funding within a few days through other venues.

However, if PPP and EIDL has not come through, the situation is different. Now business owners need to be able to get whatever funding they can to stay alive.

First, there’s debt relief. Business owners need to look towards their established relationships. Utility companies may be willing to delay payments, as may services such as security alarms. Rent negotiations should be entered into immediately if they haven’t been already. If dismissing payments entirely is not an option, the payments may be able to be amortized over the rest of the year.

In terms of cash flow, the merchant processors that business owners are using may be able to deliver on short-term lending. Those who have been using services like Shopify for some time may be able to qualify for their own internal funding service. PayPal also has a working capital loan through their Loanbuilder service, based on how much money a person generally pulls in through PayPal.

Finally, some business owners may even find that the Employee Retention Credit helps them enough. The ERC offers 50% of employee wages, up to $10,000, for employees retained during a period that the business was impacted by Covid-19. This is something that is an option for those who could not get PPP or declined to get it.

Engaging in Phased Reopening

The majority of states are reopening in phases. Companies are likely going to have to do so, too. A restaurant can’t immediately begin operating at its same previous capacity. In many ways, it’s like starting a business all over again.

Phased reopening has the benefits of lower overhead, but companies are also going to need to relearn how things work in the new world. Restaurants are likely to remain under-populated for some time as people still worry about a rebound, people are going to continue working from home for at least a couple more months, and many households will continue ordering their groceries online forever.

As many small businesses are going to fail, B2B sales are likely to see lower numbers for months to come. And because the chips haven’t all fallen yet, it’s hard to say what the landscape will look like for small businesses. Small businesses need to shore up and protect themselves now, reducing their expenditures as much as possible, and reopening cautiously to avoid over-extending.

Employees Refusing to Come Back to Work

With unemployment now paying between $20 to $24 an hour depending on area, some employees are finding it more lucrative to decline work than to come back to work. While this is technically not allowed (employees cannot decline work and remain on unemployment), a lot of small business owners are hesitant to burn their bridges with valued employees.

But this isn’t an issue that is as widespread as it might seem. Most employees understand that it’s not worth it to lose a job altogether over a few months of extra pay. This issue is primarily being seen in the restaurant/service industry, which already sees high churn.

Pandemic Unemployment Assistance (the additional $600 a week) will run out in July, but this need not be the impasse that it seems. Many businesses could actually do better bringing their employees back part-time. Businesses shouldn’t ramp up immediately because no one knows whether coronavirus will have a second wave or whether additional shutdowns will be required. Unemployment is applicable to employees who have had their hours cut.

​If you are working fewer hours due to COVID-19 and it has resulted in a loss in income, and you are not eligible for regular UC, you may be eligible for PUA.

On the other hand, employers can also opt to replace their employees. PPP requires that employers have the same number of employees, not that they maintain the same employees throughout.

This is a pragmatic question for many business owners, any discussions of ethics aside — and it’s worth having conversations with employees about the options.

Moving Forward, Together

Everyone is in this together. Small businesses have been hit harder than most. Unfortunately, many currently feel betrayed regarding PPP and EIDL — aid that was promised and that may not have materialized. There have been issues that should have been foreseen (such as publicly traded companies tapping funds meant for small businesses), as well as issues that could not have been previously addressed (such as the technological framework simply being too overwhelmed to process data). Either way, we need to start moving forward.

A mad scramble for funding is now being replaced by a more contemplative tone. Now that funding is either here or just not coming, business owners need to start thinking about how they’re going to encounter the brand new world before them. It’s going to take work and collaboration to get to where we once were, and the face of many industries is likely to be forever altered once we’re through.