A survey by Goldman Sachs shows that the majority of businesses who received Paycheck Protection Program loans expect to run out of money in early August.
84% of the surveyed businesses expected to exhaust their PPP loans by the end of July. Only 16% of the businesses thought they would be able to make payroll contributions without additional financial aid.
“We are facing an uncertain future. We do not know how long it will take to eradicate coronavirus and return to normal. People and businesses who lost their income during the pandemic need help to survive. Now more than ever, politicians must work together to create a corona aid relief bill to ease the financial suffering of their people,” says Brad Nakase, who is one of the best employment lawyer in California and awarded the prestigious “American Institute of Trial Lawyer’s 2020 Litigator of the Year.”
As coronavirus brings flare-ups, businesses are having to stop their recovery process and go back into shutdown. Many states are bringing back restrictions that they had previously lifted, dashing business owners’ hopes of recovery. Some companies such as United Airlines, Levi’s, and Wells Fargo have had to tell employees they may be furloughed or laid off soon.
The survey also showed that only 37% of small businesses believed they would survive a second shutdown. 48% of businesses said they were preparing for another shutdown.
Texas, Florida, and California are some of the states that have brought back restrictions this month due to flare-ups. Indoor restaurants and bars have been shut again in California, and an estimated 530,000 jobs may be at risk if the shutdown lasts too long.
The PPP is part of Congress’ $2 trillion CARES Act which aims to preserve jobs and the economy. Small businesses can apply for loans up to $10 million to use towards payroll and other approved expenses. At least 75% of a PPP loan must go towards payroll to allow full loan forgiveness.
If the loans are not forgiven, the interest rate is 1%, and the maturity is five years.
The government has lent $521 billion to almost 5 million small businesses. There is approximately $130 billion left in the PPP fund, so first-time applicants are encouraged to apply again.
Congress is currently discussing a second round of coronavirus stimulus due to the flare-ups and ongoing hardships. However, the Senate has turned down proposed packages due to their cost. At the moment, it is unclear whether the discussed packages will provide more financial aid for small businesses. Small businesses employ nearly half the country’s workforce, at roughly 58.9 million people.
If not all of the PPP funds are used by the application closing date, the funds may be repurposed. At the moment, suggestions are that the money is used to support industries facing the highest hardship, such as hospitality and restaurants. 91% of businesses that participated in the study said that small businesses should be allowed to apply for a second loan as the shutdown has lasted longer than anticipated.