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Congress' Coronavirus Loans To Small Businesses Only Delay Closures, Some Entrepreneurs Say

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A small business is closed in Venice Beach, California, during the COVID-19 pandemic. (Apu Gomes/AFP/Getty Images)
A small business is closed in Venice Beach, California, during the COVID-19 pandemic. (Apu Gomes/AFP/Getty Images)

Congress passed the Paycheck Protection Program last month to help subsidize small business owners suffering during the coronavirus pandemic — but some owners are raising the alarm about a catch in the emergency aid.

Under the $349 billion program, which has now run out of funds, businesses with fewer than 500 employees applied for low-interest loans to cover payroll. The loan later turns into an outright grant as long as it’s used to pay staff for eight weeks.

The program requires that 75% of the loan goes to payroll, which means non-essential businesses forced to close to the public have to pay their employees who aren’t working instead of the bills piling up. Some owners say there won’t be a business left after eight weeks if the economic impacts of the coronavirus continue for months.

Carrie Kepple is the owner of Styles Studios Fitness in Peoria, Illinois. (Courtesy)
Carrie Kepple is the owner of Styles Studios Fitness in Peoria, Illinois. (Courtesy)

With her business closed, Carrie Kepple of Styles Studios Fitness in Peoria, Illinois, says she’s had to negotiate with her landlord and work out deferrals for equipment loans.

“As a service-based business deemed non-essential and required to remain closed, this eight week period basically means I'm just a passer of money to my people,” she says. “But it does not help me secure their jobs for the future, which could continue to create unemployment issues down the line.”

To prevent further unemployment problems in the future, Kepple says small businesses need a pathway through the next 18 months to help them survive this crisis and create jobs.

If businesses like hers are precluded from loan forgiveness because they can’t comply with the eight-week rule, she suggests the government allows for a 10-year repayment plan similar to other Small Business Administration loans.

“That could do some benefit to both the employees and the business, which is critical in this to ensure longevity,” she says.

Joe Walsh owns Green Clean Maine, a house cleaning service in Portland, Maine. He says his staff who make $17 per hour on average are earning about $23 per hour from unemployment.

That’s because of the economic relief package passed by Congress which includes an additional $600 to state unemployment benefits.

“Although the intention of the federal unemployment supplement has been noble to make employees whole, what it's doing is it's creating this reverse economic incentive,” he says. “My employees that are at home collecting unemployment are actually going to be making more money than the employees that I would bring back and put on payroll.”

Joe Walsh of Green Clean Maine. (Courtesy)
Joe Walsh of Green Clean Maine. (Courtesy)

Some people suggest Walsh put his employees back on the payroll for eight weeks so his loan is forgiven. But he says that doesn’t benefit the business itself with rent and administrative costs making it more expensive to stay open than close the business down.

Though he wants the loan forgiveness, he feels bad asking his employees to turn down the federal unemployment benefits since they can’t work either way.

His employees want to work despite making more money on unemployment, he says. But he doesn’t want to put them at an economic disadvantage.

Plus, if he offers to put his employees back on payroll and they decline, that would make them ineligible for any kind of unemployment benefits.

“It puts me in a really awkward position with my employees, which is why I don't intend to use the money that way,” he says. “I'm not going to pay my employees to sit at home when they could make more on unemployment.”


Chris Bentley produced and edited this interview for broadcast with Peter O'DowdAllison Hagan adapted it for the web.

This segment aired on April 16, 2020.

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