Small business needs PPP forgiveness fix

Small business needs PPP forgiveness fix

Congress and Treasury Secretary Steven Mnuchin: If you truly care about the survival of America’s small businesses, fix the forgiveness provisions of the Payroll Protection Program (PPP) and fix them fast. Moreover, we need additional help for millions of small businesses who are facing annihilation.

PPP forgiveness provisions are, in a word, a mess. Right now, the PPP is creating incredible confusion, pitting small business owners against their employees, conflicting with the reality of many small business PPP recipients, and not addressing significant non-payroll expenses of small businesses.

When Congress enacted the PPP, rather than providing simple grants to the smallest businesses, they created a complex system. To qualify for loans to be forgiven, small businesses must rehire their workers for eight weeks. Even if they aren’t open; even if there’s no work.

What's wrong with PPP

That seems silly on the face of it, doesn’t it? It’s proven to be totally frustrating. Sure, that works for those small businesses which continued operating throughout the COVID-19 crisis or that have been able to quickly re-open at full or near-full capacity. For the overwhelming majority of small businesses still closed or facing significantly reduced demand? These provisions make little sense.

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Worse, the forgiveness provisions are far from crystal clear. I spoke with both my accountant and a business lawyer the same day; they gave opposite interpretations of a key forgiveness provision. I’ve repeatedly been advised whether a business has met the forgiveness provisions would be “up to individual banks.” In other words, what one bank will allow, another might not. Ridiculous!

But what may be the absolute worst provision is the PPP pits small business owners against their employees. I know a dental hygienist who was laid off early, as patients stayed away, worried whether a teeth cleaning was safe. Nevertheless, her boss is opening the office to meet PPP forgiveness provisions, giving hygienists ultimatums: return to work or be fired. Because it’s likely there will be vastly reduced customer demand, he’s offering only part-time work, and the pay won’t cover her day care costs.

On top of this, dental hygienist is listed as the number one most at-risk job for COVID-19. She’ll be putting her life at risk and losing money. Or, she’ll lose her job—a job she loves. This is not necessary.

It’s also leading to a backlash against Republican governors whose efforts to re-open their states are seen as cynical ploys to help larger businesses meet PPP requirements and force workers off unemployment even when their health may be at risk.

What's the solution?

Let’s fix the PPP forgiveness provisions ASAP and enact new programs to help all small businesses survive.

Fixes for PPP:

Allow the smallest businesses to convert PPP loans into a grant. If a small businesses received $100,000 or less, let them file a simple form and have the loan automatically forgiven. Extend the eight weeks forgiveness provision to December 31, 2020, or eight months after the business reopens if still on lock-down. This enables them to rehire employees when there’s actually likely to be customer demand, reducing conflict with employees. Widen the use and percent of forgivable funds so it better matches the current reality of small businesses, enabling businesses to use the funds for higher rent, utilities, equipment maintenance/leases, insurance, operating expenses, etc. Allow small businesses to deduct expenses they made under PPP as normal business expenses. Congress clearly intended PPP forgiven loans to be non-taxable. Now, Treasury Secretary Mnuchin is saying expenses covered by PPP forgiveness will not be tax-deductible. By disallowing normal business deductions, he is, in effect, taxing forgiven PPP dollars.

What is needed in addition to fixing the PPP forgiveness provisions is more money, more programs, more time. With such an uncertain future, small business owners do not want to take on debt. Simple, straightforward grants are necessary.

More programs and more cash are critical. In the first round of PPP loans, only 5.7% of America’s small businesses received funding. Experts warn that it may take more than a year to get the virus under control, small business grant and aid programs must last throughout the duration of the Covid-19 crisis and recovery.

America must act fast to save tens of millions of small business jobs. According to Main Street Alliance, “countries that elected direct subsidies to business, have been spared the massive spike in unemployment we have experienced here in the US.”

A coalition of more than 60 small business organizations warned: “With little or no revenue coming in, entire sectors of the small business economy face extinction.”

That would be a disaster. Half of all jobs in America are in small businesses. If we don’t save them, America will not recover from this crisis.

Rhonda Abrams is the author of “Successful Business Plan: Secrets & Strategies,” the best-selling business plan guide of all time, just released in its seventh edition. Rhonda was named a “Top 30 Global Guru” for Startups. Connect with Rhonda on Facebook, Instagram and Twitter @RhondaAbrams. Register for Rhonda’s free business tips newsletter at


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