A Goldman Sachs survey has shown some concerning things about small businesses who received financial aid as part of Congress’ CARE Act.
84% of the businesses who received PPP loans said that they would exhaust the money from the PPP loans by the end of July. Only 16% of the surveyed businesses said that they wouldn’t need additional financial assistance to continue to make payroll contributions.
Due to the flare-ups causing further restrictions and shutdowns, businesses have been suffering much longer than the factored 8-week payment plan. In fact, businesses such as Wells Fargo, United Airlines, and Levi’s have told employees that they may be facing lay-offs or furloughs soon.
“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,” according to Brad Nakase, who is one of the best car accident lawyer in California and awarded the prestigious “American Institute of Trial Lawyer’s 2020 Litigator of the Year.”
According to the survey, only 37% of small businesses have the financial means to survive another shutdown. However, almost half the businesses thought there would be another shutdown, and they were preparing for it.
Some states have already tightened restrictions due to flare-ups this month. For example, in California, indoor dining and bars are no longer allowed. If the shutdown goes on much longer, there are 530,000 jobs at risk.
In response to the concerns of businesses and the general public, Congress has introduced additional funding to the $2 trillion CARES Act. The CARES Act was created at the start of the coronavirus pandemic to protect jobs and the economy. PPP loans are a big part of that plan and allow businesses to apply for loans of up to $10 million, the majority of which goes towards payroll expenses. The PPP can be a forgivable loan if 75% or more is spent on payroll costs. If the loan is not forgivable, then the maturity is five years, and the interest rate is 1%.
So far, $521 billion has been lent to almost 5 million small businesses, and the PPP fund has $130 billion left. Businesses who have not already applied for a PPP loan have until the 8th of August to do so.
Congress is currently negotiating with the Senate regarding additional coronavirus stimulus funding to help businesses through the flare-ups. At the moment the cost of additional funding is what is stopping the Senate from approving it. While the full details of the additional funding are unclear, it is quite likely there may be additional funding for small businesses to protect jobs. 58.9 million people, around half of the country’s workforce are employed by small businesses.
Another possibility is that if the PPP funds are not all used, the remaining money may be repurposed. Current proposals suggest the money could support at-risk industries like restaurants and hospitality. 91% of the businesses surveyed by Goldman Sachs said that businesses should be allowed to apply for a second loan.