The Register Citizen (Torrington, CT)
Second round of PPP loans launches
Congress changes rules for original loans
WASHINGTON — Calzone Anvil Case Co. in Bridgeport makes heavy shipping cases for musical equipment, lights, art and artifacts, even Super Bowl trophies and the ball that drops in Times Square on New Years Eve.
The cancellation of live events during the pandemic has stalled shipping and slashed business for Calzone Anvil Case, which laid off more than half of its over 100 person staff this year. Calzone Anvil Case got help from the Paycheck Protection Program this spring, but with revenue down over 50 percent, it will be one of thousands of companies in Connecticut seeking a second forgivable loan from the program, said President Joe Calzone.
“This additional money will certainly help us get through the doldrums of the winter months,” he said.
The Small Business Administration reopened the popular Paycheck Protection Program last week, allowing more companies to get a forgivable loan for the first time and some hard-hit businesses to apply for a second loan.
All lenders will start offering PPP loans again on Tuesday, the SBA said. Last week, small lenders, community development financial institutions, and minority depository institutions began offering the loans first to some borrowers.
PPP loans are loans of up to $10 million for companies with fewer than 500 employees that can be forgiven if companies use most of the money to cover payroll and keep employees on staff. After Congress passed a new COVID relief bill in December, the SBA got more money to offer the original PPP loans and grant second round loans to businesses with significant revenue declines during the pandemic.
Now businesses with fewer than 300 employees and demonstrated revenue declines of at least 25 percent in one quarter of 2020 compared to 2019 can get a second, smaller PPP loan. These second draw loans are capped at $2 million. Businesses working in food services and accommodation businesses can get larger loans than companies that do not.
“There have been some sectors in Connecticut that have been hit very hard, especially commercial aerospace , a big part of our manufacturing sector,” said Connecticut Business and Industry Association President and CEO Chris DiPentima. “It’s very likely that many of the manufacturers in that sector experienced 25 percent revenue reduction... so they’re going to be eligible for that second draw. It’s a huge opportunity to get money again to the businesses that, not only are smaller, but are really distressed because of the impact of COVID.”
As of Aug. 8, when the program closed, the SBA had made 5.2 million first round PPP loans, including over 64,000 in Connecticut, SBA data shows.
The new law makes some key changes about how the original PPP loans can be used (and still forgiven) and who can get them now that applications have reopened. It turns up the scrutiny on loan applications.
The law makes another big change lobbied for by the National Small Business Association: It allows companies to deduct business expenses paid for by their PPP loan from their taxes, reinforcing the intent of Congress that PPP is a tax-free loan, said Molly Day, vice president of Public Affairs for NSBA.
The law allows people to use their PPP loan to pay for software, accounting needs, personal protective equipment and even property damage sustained from “public disturbances” that happened during 2020.
“The members are pretty pleased to see a little broader use of the funds especially around personal protective equipment, and the software,” said DiPentima. “It’s all about keeping the employees safe and healthy.”
The law clarifies that businesses that were not in operation on Feb. 15, 2020 — prior to the pandemic — are not eligible for the loans.
It excludes publicly traded companies from PPP eligibility. More than 200 companies with publicly traded shares, including at least two in Connecticut, were approved for PPP loans. Some decided to return the money in the spring after public outcry.
The law makes housing cooperatives, destination marketing organizations, 501(c)6 organizations and news organizations eligible for PPP loans.
It requires the president, vice president, members of Congress and heads of government agencies publicly disclose whether they or their spouse got a PPP at loan forgiveness. Companies tied to at least 12 members of Congress received loans, according to Fortune.
The law also requires that the SBA submit to government oversight of the loans and testify about the program to Congress regularly.
“I think there’s going to be more SBA staff member eyes on these loans,” Day said. “That’s just in response to the fraud issue.”
The SBA inspector general in October reported tens of thousands of companies received PPP loans for which they appear to have been ineligible, like ones created after the pandemic began, businesses that exceeded workforce size limits, or those listed in a federal “Do Not Pay” database because they already owe money to taxpayers. The Department of Justice charged seven people in a scheme to fraudulently obtain $16 million in PPP loans in November.
Some individuals who received first round PPP loans are now applying for loan forgiveness through their lenders and the SBA. Loan forgiveness started in October and may take a few months for applicants to complete, DiPentima said.
President-elect Joe Biden, who will be inaugurated Wednesday, said Thursday he wants to include more relief for small businesses in another COVID-19 relief bill he is asking Congress to pass in the next few weeks. Biden wants $15 billion to offer flexible grants to small businesses. He also wants $35 billion to offer low-interest loans and venture capital to entrepreneurs.
Biden is likely to need some bipartisan support for this legislation, which is likely to make certain elements and the overall pricetag of his $1.9 trillion American Rescue plan hard to get through Congress.