Many say loans won’t get them to rehire

WASHINGTON » Some small businesses that obtained a highly-coveted government loan say they won’t be able to use it to bring all their laid-off workers back, even though that is what the program was designed to do.

The Paycheck Protection Program promises a business owner loan forgiveness if they retain or rehire all the workers they had in late February. But owners say the equation isn’t so simple, in part because of current economic conditions and partly due to the terms of the loans. As a result, the lending may not reduce unemployment as much as the Trump administration and Congress hope.

The government’s $2 trillion relief package included $349 billion for the small business loan program, which was besieged with applications and ran out of money Thursday. Congress and the White House reached a deal Tuesday that would provide another $310 billion.

To get the loans forgiven, companies need to spend 75% on payroll within eight weeks. The other 25% can be spent on rent, utilities, and mortgage payments. Otherwise, the loan has generous terms: Only a 1% interest rate and six months before any principal is due.

Many of the small companies that were able to obtain a loan are having second thoughts about rehiring all their workers and a few plan to return the money. Others will use what they can on rent and utilities, and will use some to rehire a portion of their laid-off staff. But most are unsure they will be able to reopen eight weeks from now. They see little point in rehiring all their workers, paying them to do little or nothing, and then potentially laying them off again if business remains weak two months from now.

“You’re turning the business into a pass through for the federal government,” said Joe Walsh, who owns Clean Green Maine, a cleaning service in Portland, Maine with 35 employees. “You’re doing very little to actually help the business.”