As billions of dollars in federal aid flow into Maine small businesses through an emergency loan program, calls are mounting to change the program and give employers the option to use the money. more efficiently.
Lawmakers and small business advocates are also pushing for larger programs to stabilize local economies, as the catastrophic business conditions triggered by the coronavirus pandemic show few signs of slowing down.
Maine businesses had received more than 24,000 forgivable loans worth nearly $ 2.3 billion from the federal paycheck protection program as of May 1, according to the US Small Business Administration. Funding is intended for small employers to pay employees and cover basic expenses for two months.
The loans have been a boon to many businesses, but others say there are loopholes in the program that prevent many businesses from taking advantage. Strict rules on how the money can be used and an eight week deadline to rehire all workers are among the most criticized.
As the pandemic hit Maine, Joe Capozza laid off 20% of the 54 employees at his three flooring companies in Portland and predicted the situation would get even worse.
His emergency loan allowed him to keep everyone paid and rehire about half of the workers he lost.
“That’s the most important thing about it, being able to keep people from receiving a paycheck,” Capozza said. “There has been a big boost in morale in the company. “
The funding also gave the company leeway to develop procedures to continue to work safely with social distancing measures and prepare for an uncertain future, he said.
“I think nobody knows what it’s going to be on the other side of it, but it helps us prepare for it,” Capozza said.
The Portland Press Herald and other newspapers owned by entrepreneur Reade Brower in Maine are among the companies that have received loans under the Paycheck Protection Program.
“It really allows us to continue to operate as our advertising revenues decline dramatically,” said Lisa DeSisto, editor and CEO of The Press Herald.
Peter Hein was about to be laid off at Ron Brown Plumbing and Heating in Cumberland when he received a paycheck protection loan. Business dried up in March, when customers were unsure whether to allow workers into their homes.
“What I really appreciated is that it created a certain level of certainty for us to keep our employees on the job,” said Hein. Customers are slowly coming back – it’s about 50 percent of the volume it had over a month ago.
Hein is using the loan to prepare for everything to come, including a possible second wave of infection this fall.
“I don’t know what summer brings; I have to operate week after week, ”said Hein. “We may be living in a different world in the fall.”
That uncertainty has led some companies, especially in southern Maine’s sprawling restaurant industry, to speak out against what they see as shortcomings in the program.
Three-quarters of each loan is supposed to be used to cover the payroll and 25 percent to cover basic expenses such as rent and utilities. Each loan is forgivable if the recipient follows certain guidelines. Any amount that is not remitted must be repaid within two years at an interest rate of 1%.
These restrictions convinced Krista Kern Desjarlais that the loan would not work for her business, the Purple House bakery in North Yarmouth. With the coronavirus still circulating, no income and no idea when the situation will improve, Kern did not want to take out a loan with confusing forgiveness standards.
Some Maine business owners have said that one of their biggest fears about using the loan program is that if they don’t meet loan cancellation standards, they’ll always be stuck in a recession and struggling with additional debt that they will not be able to repay.
People are unlikely to crowd into restaurants anytime soon, and Kern worried that he would have to lay off his employees again when the money ran out. She is not ready to reopen her bakery and does not know how she will run her summer ice cream and take out stand.
“I think this plan was put together in good faith to help small businesses, and there are a lot of small businesses that can use it and use it well,” she said. “Restaurants just aren’t organized in a way that makes this possible at a time when people are afraid to go out to eat. “
Some restaurants and other businesses are concerned that they will not be able to meet program requirements because they are unable to pay employees made redundant more than a month ago more than what they are currently making from allowances. weekly unemployment rates improved.
According to the US Treasury Department, if companies can prove that they made a job offer to a dismissed employee that was turned down, it won’t affect their loan forgiveness. Workers temporarily unemployed due to the pandemic may also become ineligible for other unemployment benefits if they decline an offer to return to work.
Senator Susan Collins, R-Maine, one of the architects of the Paycheck Protection Program, said the amount of money disbursed in such a short time shows it is a success.
“I can’t think of another program that has been more beneficial for small businesses in Maine and their employees that has been implemented in the midst of a crisis and has been as helpful as this one,” he said. she declared.
When the program was drafted in March, such a long-lasting economic shutdown was unanticipated, Collins said.
“We had no idea the businesses were going to stay closed for as long as they appeared to be in the state of Maine,” she said.
In hindsight, it would have been helpful if the loans covered a period longer than eight weeks, or allowed a business to start using eight weeks at a later date, she said. Going forward, discussions are underway on next steps, including more repayable or low-interest loans to help prepare for the reopening of businesses such as restaurants.
“We’re talking about all kinds of different ideas on what’s next,” Collins said.
Lawmakers and business associations are pushing Congress to change the program to give businesses more flexibility.
In a letter to the Maine congressional delegation, Senator Rebecca Millett, D-Cape Elizabeth, Democratic House and Senate leaders and about 60 other state lawmakers, mostly Democrats, called for program reforms .
They said the eight-week measurement period to start spending the money should be extended or postponed until businesses can meaningfully operate again, such as when restrictions are lifted under the government’s plan. Governor Janet Mills to restart the economy. They also asked to allow companies to use more than 25% of the loan for non-salary expenses.
In a letter to Congressional leaders, Representative Jared Golden, D-Maine, asked to allow more of the money to be used for purposes other than payroll, to extend the reimbursement period of the loan beyond 24 months and further clarify the terms of surrender. .
Golden included issues raised by businesses in the 2nd arrondissement, including a hotel complex, brewery, restaurant, hotel, dentist’s office and a non-profit organization for people with disabilities.
While there are cases where businesses have benefited significantly, “some of the program rules do not reflect the long-term realities that many businesses and workers continue to face in Maine: Extended state-ordered shutdowns , anemic consumer spending and almost no money coming from out-of-state tourism as we enter Maine’s summer months, ”Golden said.
The American Institute of CPA, in its recommendations to improve the loan program, also called for allowing companies to start using the eight weeks of funding when restrictions are lifted instead of receiving the loan proceeds “so that small businesses have sufficient funds to speed up their operations. “
House Democrats are preparing another back-up plan that would extend the plan for several months and implement some of the changes companies are asking for, Rep. Chellie Pingree, D-Maine, said.
It may also include a program to cover salaries and business expenses and empower local businesses to weather the pandemic, she said. Some European countries have provided funds to cover most employee salaries and work expenses in order to limit unemployment.
“One of the arguments is why not just pay the salaries instead of blowing people through hoops? Pingree said. “I don’t see this economy picking up any time soon, even as states start to open up.”
It remains to be seen whether such radical proposals are realistic.
“I never thought in my life that we were going to invest so much money in the economy,” Pingree said. “I wouldn’t reject anything as a next step.”
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