Financial Adviser: Keep an Eye on the Bouncing Ball of PPP Funding

February 2021

By Justin Beets

Despite change in administrations, both sides appear committed to small-business relief.


In any political regime change in Washington, the biggest issue is always uncertainty. We obviously hear a lot of speculation about the possible changes that could be coming but until the new party or leadership gets into office, we never know what that’s going to look like. 

Certainly, there is a greater chance now of legislation being passed since one party controls both Congress and the presidency, but it’s still too early to tell what that final legislation will look like. In the past, when we have seen changes like this; regardless of the party taking over, we tend to see businesses hang on to cash longer because of the uncertainty. Obviously, this transition is unlike any I have personally seen due to the pandemic and the vital stimulus programs that are providing access to capital that many business and consumers need right now. I have been encouraged by the fact that both parties tend to agree that help is needed right now and are doing the best they can to get consumers the help they need.  

Given that, businesses should be paying attention to a multitude of factors when it comes to economic stimulus, and the Paycheck
Protection Program stimulus is one of them. The PPP provides loans to help businesses keep their work forces intact and pay their employees’ salaries and other expenses during the pandemic. 

Washington has also been working to stimulate the economy by keeping interest rates low and providing loan-payment assistance for student loans and mortgages. The federal government has also been helping small businesses with Small Business Administration loan-payment assistance. On a broader scale, businesses should be paying close attention to external factors that can affect the current economic stimulus, such as consumer confidence level, unemployment level, and perhaps just as important, how quickly vaccines will be made available to the general public as we move toward getting back to a pre-COVID-19 economy.


Changes Still in the Works

While it’s too early to tell whether there will be further enhancements to the PPP program, we have seen enhancements made to the forgiveness process for those who borrowed $150,000 or less for the initial PPP loans last April. This current round of PPP was much needed by a lot of businesses, so it does seem like there is a willingness to continue to help out and evolve the program. 

We have found that an overwhelming number of small businesses were left out of the first round of PPP funding. This was either because they didn’t have a banking relationship, or they simply were not educated about the program. It’s notable that the program has evolved not just from the government standpoint, but also from a bank perspective, as we are figuring out how to better serve communities and clients even in spite of uncertain and ever-changing circumstances. 

The government has made the forgiveness process much easier for people who borrowed $150,000 or less in the first round of PPP funding. That process now includes a simple one-page application for forgiveness and should help make the process much faster and easier for borrowers. 

Also in this latest round of PPP, several key changes will affect qualification for a second PPP loan. First, the number of employees a business can have to qualify was reduced from 500 to 300. Second, the cap on the PPP loan was reduced from $10 million to $2 million. Finally, the borrower must now prove that not only has COVID-19 affected their business, but they must be able to show that it caused a 25 percent or greater decrease in annual revenues from 2019 to 2020, or that it caused a 25 percent or greater decrease in quarterly revenues from the same calendar quarter in 2019 vs. 2020 (i.e. Q2 2019 vs Q2 2020).

Unemployment figures are promising, and a welcome sign, given where they were at during the height of the pandemic. The pandemic has affected all industries differently, with some industries thriving and some industries being adversely affected. 

Each industry is different, so it would be difficult to say that businesses have largely recovered, but it does seem that things are trending the right direction and that government stimulus such as PPP has kept many businesses afloat as they navigate through this difficult time.