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Business owners see flaws in PPP

Forgivable loans being received before companies are allowed to work

Local business owners say the Paycheck Protection Program is a good idea but has at least one serious flaw.

The Paycheck Protection Program is a forgivable loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.

The Small Business Administration will forgive loans if employees are kept on the payroll for eight weeks, and the money is used for payroll, rent, mortgage interest or utilities.

According to local business owners, one of the biggest problems is that the loan money must be used for payroll in an eight-week period following the loan closing.

For those businesses that are under forced closure, the forgiveness period could be reduced from eight weeks to as little as two or fewer depending upon when the funds are received, and when businesses are permitted to reopen.

Some businesses that get their loans sooner find themselves penalized over those who get them later due to mandatory closure.

This favors those businesses that are still operating over those that are forced to be closed by their government and favors businesses in states that may reopen sooner, some business leaders contend.

In this sense, there will be less of a benefit for businesses that serve those states or regions that have been hit the hardest, the locals said.

“It is a great thing they are doing for us,” Ralph J. Albarano, president of Ralph J. Albarano and Sons Inc., Duncansville, said. “The only flaw I recognize is the fact they want to count your eight-week period beginning when the money is deposited into your account. In my business, I am still not allowed to work. The clock is ticking on one end, but I can’t put my people to work on the other end. If they would allow your time to begin the clock when you actually go back to work, that would be a fair way to do it.”

Michael Kranich Jr., president of Kranich’s Jewelers, agreed.

“Sadly, the PPP forgiveness period for some is ‘operational,’ and for others it is ‘non-operational’ — this allows operating states or essential business forgiven payroll while open. For the businesses shuttered and those in states with longer closures, this payroll forgiveness is while they are closed.

“Less stressed businesses or those in open states will benefit more from operational forgiveness,” Kranich said. “I cannot believe the intent was to provide greater relief for those with less impact, but it seems to be the reality. The forgiven eight weeks of payroll while open would give many small businesses in our area a chance to refuel and restart their economic engine in a way that is not available under mandatory closures. If the period forgivable would start on the date that the business is allowed to reopen, then it would essentially give businesses flexibility to keep their ship afloat. The best way to protect workers is to protect their jobs.”

George Batrus, owner of Tom and Joe’s Restaurant, Altoona, agrees the PPP is flawed and fails to help restaurants.

“I’ve had concerns from day one,” he said. “I realized if I didn’t apply quickly, I wouldn’t get it, (and) if I got it, I was in a bad situation. I don’t need it right away. There is an eight-week window to use the money. Business owners should have had some say in that. I am grateful they have the program, but they can’t paint every business with a broad brush. If I would open now, I could only operate with 50 percent capacity. Other places like gyms, can’t open at all. It makes no sense when other states are opening. They get the same money and same window, but we have to stay closed. It puts you in an awkward situation.”

Until that program is fixed, it won’t help America’s 500,000 independent restaurants reopen or ensure their 11 million employees have a job when this ends, the Independent Restaurant Coalition said in a statement.

“Restaurants are cash-flow businesses, and until they can generate revenue, they’ll still have a hard time maintaining a payroll whenever they reopen. Changes to the Paycheck Protection Program, like moving the origination date of the loan to when restaurants can legally operate, are necessary to ensure restaurants can afford to reopen and rehire our workers,” the coalition said.

When asked to comment on the program and local business owners concerns, U.S. Rep. John Joyce, R-13th District, said the program was passed by Congress to ensure that businesses could pay their employees during this crisis, keeping their businesses intact while their ability to conduct business operations is greatly restricted.

To be eligible for these forgivable loans, the borrowers certified they would use the money to primarily cover their normal and ongoing payroll costs.

“All of us want Pennsylvanians to get back to work as soon as possible, and the Paycheck Protection Program is helping many small businesses and their employees weather this storm,” Joyce said.

Kranich believes as written in the interim final rule, the program won’t help as many local companies under “mandatory closure” orders. He said he is worried about local businesses and employees.

“Many of those getting the loans are unaware as to all the details,” he said. “In fact, all the details on forgiveness are not out in final guidance. Many small businesses are not in a position to take chances on the forgiveness portion by paying staff while closed. In fact, I believe many staff are doing better with special unemployment provisions. We care deeply for our employees and this makes this our most difficult period in our business life.”

State Rep. Lou Schmitt, R-79th District, did not want to comment on the specifics of the federal program but said, “If we don’t get businesses up and running soon, PPP won’t matter, because there won’t be any paychecks left to protect.”

Mirror Staff Writer Walt Frank is at 946-7467.

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