Government can incorporate lessons learned from PPP into future programs
As with any major disruption, such as military conflicts and economic crises, the economy rebounds and emerges stronger. The post-war era brought prosperity to middle-class Americans, and the bursting of the real estate bubble prompted closer scrutiny of mortgage applications for creditworthiness. Now, as the number of COVIDs drops and restrictions related to the pandemic decrease, the Americas are eager to return to a pre-COVID world.
The Paycheck Protection Program (PPP), which ended at the end of May, is recognized as a historic business assistance program that has been a success on many levels. Almost 12 million businesses have received much-needed loans under the PPP. About $ 800 billion in capital poured into small businesses, keeping business owners afloat while providing what was essentially unemployment for their workers.
Senator Jeanne Shaheen (D-NH) recapped the Paycheck Protection Program in a webinar co-hosted by Biz2Credit, AICPA and PayChex.
“We developed the PPP so that small businesses can keep their employees on the payroll. In New Hampshire alone, the program has kept over 250,000 people employed, ”said Senator Jeanne Shaheen, a former business owner who sought to sit on the small business committee when she arrived in Washington. “It is important that we support them as much as possible. “
The senator noted that about 2/3 of American jobs are created by small businesses and that they create 16 times more patents than large companies.
“A lot of the innovation we have comes from small businesses,” she said.
One of the things Shaheen said elected leaders learned when they spoke to small business was that the program needed more flexibility.
“We’ve tried to write more flexibly so that businesses can use dollars that better help them stay open,” she said.
Senator Shaheen also highlighted the role FinTech companies play in the success of PPPs by bringing much-needed capital into the hands of women-owned and minority-owned businesses.
“For businesses with less than 10 employees, it is difficult to establish with a lender. That’s why we’ve tried to direct money directly to small businesses, ”she said. “It’s hard for small businesses to get money from financial institutions where they might not be regular customers, so we’ve been trying to expand the ability of small businesses to find lenders. “
Senator Shaheen said she hopes the government can incorporate lessons learned from PPP into future programs and should also expand and incorporate fintech into SBA loans to improve cash flow to small businesses.
“CPAs were on the front lines for their clients and helped them receive funding that kept them viable,” said Erik Asgeirsson, president and CEO of CPA.com, the business and technology arm of AICPA. “The PPP provided financial security. It helped them keep the employees on the payroll. Without PPP, they would not have covered their labor costs and would have reduced their workforce. “
“We have had clients who cried because they were so happy,” said Frank Fiorille, vice president of risk management at PayChex. “They thanked us for the payroll report and gave good news to their employees. “
Fiorille said PayChex customers have received more than $ 65 billion in PPP loans – about 8% of the entire program – more than any single lender provided.
“Receiving this PPP funding has been very beneficial,” said Steven Pawlyk, CEO of Innovative Performance Productions. “I have a unique business and it depends on the organization of events in the spirits industry. If there are no events, I don’t need to exist.
“The combination of my second-round PPP grants and New Hampshire grants allowed me to continue paying all staff without any work being completed. Having an experienced accountant who can give you up-to-date information and keep you on track is very beneficial, ”he said.
Distributing Paycheck Protection Program funds to small business owners, such as Steven Pawlyk, has gone a long way in supporting the economy. PPP is the most successful program we have ever seen.
The big reason P3 has been so popular is that if it is spent the right way, all the money can be forgiven. Borrowing money and paying it back is a burden on small business owners, but getting it forgiven is a huge boost for small businesses.
We are fortunate that the Federal Reserve now estimates that fewer than 200,000 companies went bankrupt in the first year of the COVID-19 pandemic, a number far lower than originally feared. Fed researchers estimated that from March 2020 to February 2021, the figure may be a quarter to a third higher than normal. Additionally, the report, Corporate Exit During the COVID-19 Pandemic: Unconventional Measures in Historical Context, found that “many industries have likely experienced lower than normal exit rates, and businesses that are falling behind. retirees do not appear to represent a significant portion of employment in the United States.
What’s important now is that sluggish segments of the economy rebound. For example, the resumption of Broadway shows is expected to impact the hard-hit tourism industry in New York City. This, in turn, should help the struggling restaurant industry.
Now that the PPP is over, startups and other businesses looking to expand will need to access other sources of capital in addition to the government-run PPP. FinTechs can play a key role in this mission and should be enlisted in SBA 7 (a) programs and other funding programs as approved lenders.