Small businesses across New Mexico face fiscal uncertainty like never before, and an impasse on Capitol Hill over a massive emergency loan program is only adding to it. Business owners are at the proverbial fork in the road: Should they lay off staff now and hope to reopen later, or retain their personnel while seeking payroll reimbursement from another major federal program whose rollout has been underwhelming?
The now-tapped-out $349 billion Paycheck Protection Program, a cornerstone of the $2.2 trillion CARES Act, offered forgivable low-interest loans for businesses with fewer than 500 employees. It was aimed at covering two and a half months of payroll. The federal loans will be forgiven for businesses that do not cut staff or wages, and even those that have laid off employees are eligible if they rehire and bring their payrolls close to previous levels.
Launched April 3, the program has already run out of money, and more funding for version 2.0 has been stalled on Capitol Hill. Even before the funding dried up, the Paycheck Protection Program was plagued by system crashes and confusion that frustrated small businesses, lenders and state officials. Some lenders did not participate, and others wouldn’t accept new customers. Kudos to those lenders who are providing loans for non-account holders because the businesses desperately need the loans.
Michelle Coons, regional president – New Mexico for Washington Federal Bank, tells the Journal that all types of businesses are seeking the guaranteed federal loans. They run from small mom-and-pop shops to nonprofits to businesses that provide hundreds of jobs. Coons says lenders will receive fee payments from the Small Business Administration instead of collecting interest and “we see it primarily as break-even process, but such a critical and right thing to do.”
Carla Sonntag, president of the New Mexico Business Coalition, says many businesses would prefer to be allowed to reopen safely instead of taking government aid and adding to the federal deficit. But without that option, too many are struggling and need the government relief.
President Donald Trump and lawmakers from both parties have pledged to appropriate more money into the payroll relief program, but leaders have been locked in a two-week showdown. Republicans want to limit a replenishment bill to $250 billion; Democrats want to add $250 billion for hospitals, food assistance and state and local governments.
Now is no time for partisan bickering, larding up the assistance or getting distracted from the need at hand: PPP is a valuable option for many small businesses that don’t want to let employees go. And businesses that keep their workers on the payroll perform a critical public service at this time, reining in already record unemployment levels.
It’s an important tool in salvaging the economy.
But it is time for lessons learned from PPP 1. Lenders and borrowers need to have clear guidelines for the application process. Lenders that do their due diligence should not be liable for borrowers that pull a fast one. And loans need to cover more than 25% of expenses outside of payroll, such as rent and utilities. With or without these reforms, Congress needs to replenish the Paycheck Protection Program promptly. As the nation looks for a transition past this pandemic, we need our businesses to be able to keep their staffs in place and their operations running.
This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.