Big hassle for small business

Loan aid not enough to rehire workers

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 percent on payroll within eight weeks of

receiving the money. The other 25 percent can be spent on rent, utilities, and mortgage payments. Otherwise, the loan has generous terms: Only a 1 percent 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.

“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.”

It’s unclear how much the small business lending program can hold back the surge in joblessness — a record 22 million people sought unemployment aid in the past month. Most economists forecast the unemployment rate will reach between 15 percent and 20 percent when the monthly jobs report is released in early May.

More money is clearly needed: Roughly 1.6 million small companies were able to obtain loans, the Small Business Administration said. Bank of America economists estimate that another $650 billion would be necessary to meet demand.

Also, the generous unemployment aid that was included in the government’s relief package has made it more difficult to rehire. Many workers are making more with unemployment checks, which now include a $600 weekly benefit from the federal government.

Walsh, who received a $280,000 loan from the SBA, said that he is reluctant to push his employees to return to work because, under unemployment benefit rules, they could lose their weekly checks if they turn down potential jobs.

“That’s just putting me as the employer in a really difficult position,” Walsh said.

Walsh hopes to reopen soon and bring back some workers, retrain them on new sanitizing processes, and earn a bit of revenue. Still, he doubts his business — and his workforce — will be anywhere close to what it was anytime soon.

“There’s no way that I’m getting to 100 percent employment by the end of 8 weeks,” he said.