$349 Billion incentive program to help workers pay for small businesses in the US. It’s probably too small. But it could be a big Local News help for too many businesses in the country. The $2.2 trillion stimulus package that Congress signed on March 27 by President Donald Trump on March 27 is probably best known for testing $ 1,200 for most US adults. The second most important factor may be the $600-a-week increase in unemployment insurance.

But in terms of dollars, a larger paycheck protection program (PPP) creates a stimulus package than any of these programs. The program offers loan guarantees for small businesses, at a cost of about $349 billion. Which offered through the Small Business Administration (SBA) and its partner banks.

Average Monthly

In particular, it allows businesses to borrow 250% of their average monthly salary in 2019. If they spend at least 75% of this amount to pay their workers, they will waive loans on federal spending. The application is a simple two-page form.

This is an enormous deal, and it is a program that has compared to Denmark’s approach, which allows the government to pay companies salaries for periods of crisis. But it’s important to be clear about the bill’s design and its limits.

Not all Americans will work for small businesses in 2016 – the most recent year with data – only about 47.3 percent of them work for businesses covered by the SBA. The SBA covers business locations that have 500 employees or fewer People working for McDonald’s franchises.  It also will cover companies with branches with 500 or fewer employees may cover. But many others will not. Each business loan covered at $10 million, which may not be enough to cover the larger salary expenses of small businesses.

$349 Billion Incentive Program to Help Workers Pay for Small Businesses in the US

Second, the design is awkward The Danish government provides direct grants to businesses to pay wages to workers. With the desire to get paid quickly via the SBA. They designed a US program in the form of a loan that can provide later. But there are conditions related to credit forgiveness. This leads to the possibility that some businesses will take out large loans, will not forgive later, leaving them in debt.

“I have a Ph.D. In economics and I think this is a headache, “said Adam Ozimek, chief economist, freelance Upwork platform, and owner of a bowling alley/restaurant in Lancaster, Pennsylvania, telling me.

Budget for this project

The most significant for a business looking forward, the loan should last only eight weeks. One senior assistant to Sen. Marco Rubio (R-FL). Who wrote the part of the economic stimulus bill. Explains that the budget for this project covers the 8-week salary and operating expenses for all businesses. Within the SBA. But the bill also allows others, such as only the owner and contractor, to apply for a loan. We exhaust the city budget, the program will end.

Some states, such as Virginia, have announced home orders which extend beyond the eight weeks. To cover operating expenses beyond the need for additional legislation from Congress, allowing more money for the program.

In the meantime, Rubio’s office and others are calling on small business owners to contact their banks as soon as possible to apply for the program. “The way most banks treat this is that they are creating a list of businesses that Interested, “explains Rubio’s assistant. If you think this program can help you and your workers, the time to do it is now.

How Paycheck Protection Programs Work

While the People’s Power Party has differences relating to the famous Danish method for unemployment of the coronavirus, the reason is the same. The government has forced many businesses to close with little or no warning and the government should cover the cost of decision making.

The SBA has given a brief and impressive description of how to apply for the program. Most are through lenders as part of the SBA’s 7 (a) loan program, which is the primary means of providing small business financing. (You can see the list of the largest 7 (a) lenders here.) For those who not forgiven, the loan has a very low-interest rate of 0.5 percent. We will postpone interest payments during the first six months after having a loan withdrawal If not forgiven, it must pay the full amount within two years.

The window to use is short: the application opens on Friday 3 April and closes on 30 June. For independent contractors and self-used people, they will open a little later on 10 April.

For Long Business

The loans are available for long business items. Companies with 500 or fewer employees, who are regular SBA clients, have the same rights as owners, contractors, and self-used people. Non-profit organizations are eligible if they are small enough and have special circumstances in which locations with over 500 employees can qualify for SBA loans.

The loan also differentiates companies with 500 or fewer employees and locations. For some restaurant and hotel industries, a particular economic stimulus bill allows locations with less than 500 employees to apply for loans, even if they are in a large national chain. For example, Hilton is a relatively small business: it uses approximately 173,000 people worldwide, but each Hilton hotel may have fewer than 500 employees, making it eligible for payment protection.

SBA Loan

Ozimek says he is trying to navigate the application process for his small business: decade, bar/restaurant/bowling alley/arcade in Lancaster, Pennsylvania. The eligibility requirements are weaker than normal for SBA loans, but there are still many. Employers must submit their latest 12-month payroll reports from the IRS, including detailed information about gross wages, state / local taxes, vacation wages, and more. The idea is to ensure that employers will not exceed the cost. Their normal salary to get more loans.

For forgiving loans, there are many limitations. Businesses cannot forgive loans that cover a salary of more than $ 100,000 per person; It’s not clear whether it covers or doesn’t receive benefits such as health care. Businesses will have to spend 75 percent or more of the loans on salary expenses to qualify for forgiveness, and the amount of forgiveness will reduce if the salary costs will reduce through layoffs or reduced wages. They will extend the loan to $10 million, which may limit the benefit of a particular location or enormous company.

Difficulty with the program

The biggest question mark about the law is money. They design the loan to cover expenses for eight weeks. Let’s say a business needs a loan to cover the expenses beginning this week. Eight weeks leads you to the week ending Friday 22 May.

It is not yet clear that the coronavirus crisis will end. In Virginia, most notably, the government is asking businesses to close at least two-and-a-half weeks later. This means that we will pay more salaries. The program must be more comprehensive and longer.

Support for Small Business

Glenn Hubbard, a Columbia economist and an American Enterprise Institute economist, Michael Strain, forecasts that the demand for this loan may exceed $1 trillion, offering a $1.2 trillion relief program. This means that the right funds can dry up quickly, especially if there is a rush. Hubbard, the chief economist of George W. Bush, is a liberal who rarely spends. Spectrum economists have warned that we need more support for small businesses right now.

Ozimek, an economist, and small business owner said that this uncertainty made him difficult for him and business owners were on the same plan. When the coronavirus attacked, he dismissed the server and cook at his restaurant and urged them. Towards unemployment, which is new after Congress raises $600 a week to check.

Paycheck Protection Loans Will Be Available Now Ozimek Faced with Choices He can hire all of his employees for eight weeks using PPP money, but then he will have to lie off again or continue paying them after the loan runs out if the order at home remains. This may increase the cost of the business and may worsen the workers, depending on the unemployment they receive.

What he can’t do is just use it shuts the PPP loan to mortgage and basic operating expenses down – he won’t use 75% of the loan to pay the salary, which means Can’t do forgiveness

Borrow Money

“First, the status will close your business and you want your employees to use the UI as much as possible,” Ozimek concluded. “Then the Senate will talk about the bill that seems to have paid, depending on if you keep staff It started causing rapid panic, which appeared to be too late. Then you hear that there is a revival provision: as long as we renovate it by June 30, we’re fine. We can borrow money to use it to compensate for operating expenses and then we will return the money by the 30th and everything is fine.

“Then, in the past 24 hours, the Treasury has guided their approach and said they use 75 percent of this for payroll. Therefore, we now plan to renovate by June 30 and use this money for the cost of a mortgage, rental, and utilities. You can no longer do it.“

Ozimek and John Lettieri, an economic innovation group, offer small business loan programs with less stringent spending requirements and up to 20 years of long-term repayments for companies to recover longer.

Solves Problems

But that solves a problem different from preventing paychecks. No, I mean, PPP will help small businesses continue to be solvent and pay wages to everyone. Restrictions on spending money on things. Aside from salaries, it limits the effectiveness of the program to maintain the ability to do business for a small company, which may be less relevant for the company that the worker will receive. Employment of $600 per week.

The bottom line is that the paycheck program works well. But it’s too small and too flexible It’s clear that Congress will have to do it again. As for the “fourth phase” stimulation, it should be clear about the goal: whether primarily helping people unemployed through former employers or unemployment insurance, including bailing small businesses for the future. Prevail and bail them out so they can pay wages Trying to do both seem to create difficult interactions between programs and putting small business owners in uncertain locations.