Dennis Williams struggled to get PPP
Photo via Dennis Williams

One Michigan businessman has reached out to the city, the state, and the federal level to get assistance. Reforms to the PPP leave people like him behind.

MICHIGAN — The loans from the Trump Administration’s Paycheck Protection Program (PPP) can be essential to a business’s survival of the novel coronavirus pandemic — if it can get them.

Some Michigan businesses have received PPP. An estimated 66,790 businesses received almost $6 billion in the second round of small business loans that ran from April to May, the Small Business Administration’s (SBA)  reports. But the administration also reports 873,722 small businesses were in operation in Michigan in 2019. 

That’s just 7.6% of Michigan small businesses that have received support in one of the major waves of coronavirus loans. 

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That rate is roughly comparable to other states left lacking, including in North Carolina (7.5%), Arizona (9.3%) and Pennsylvania (8.1%). 

But as the Philadelphia Inquirer reports, $130 billion in PPP money is still available. A combination of how quickly exhausted the first round of loans was and red tape likely has contributed to the amount of money still on the table, not to mention the relatively short timeframe a business can rely on the loans.

Meanwhile, as COURIER reports, major brands like the Los Angeles Lakers and Shake Shack drew on PPP funding. NBC further reports that businesses with links to President Donald Trump also were able to secure PPP money. 

What Michigan Businesses Need From PPP Reforms

Unfortunately, while a lot of the red tape is addressed by new legislation, the process remains a challenge to navigate. 

“The process is stupid,” Caleb Foster told The ‘Gander. “If [Shake Shack] got the money, everyone else should’ve gotten the money as well. The conglomerates were getting it, the bigger businesses were getting it, and the little guy was getting left out because the little guys don’t have the relationship with the banks that the bigger guys have.”

Foster and his wife, Sharoune, own several businesses, including Foster’s Childcare Center in Southfield and the Cold Stone Creamery franchise in Sterling Heights. And while some of their businesses had little issue applying for coronavirus relief, others encountered more challenges. 

The ‘Gander also reported on a struggling business that was lacking the support it needed earlier in the pandemic. Dennis Williams, owner of Le Crepe in Royal Oak, grew resentful that his business was left to struggle as the government gave bailouts to major corporations. 

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“I applied on city, state and the federal level,” he said. “I’m resentful that it is a process because I know when [large] companies get bailouts, they just get the money.”

As those stories illustrate, the process to apply for PPP loans is not exactly a smooth one. 

To apply for PPP funds, business owners must fill out an 11-page application. The completed application is then submitted to an SBA-approved financial institution. A substantial amount of support documentation may also be required, which could be difficult for very small businesses who haven’t applied for loans of this nature before. Forbes recommends engaging an accountant to assist with the PPP application process to help businesses reengage.

But many Michigan businesses are unsure if economic reengagement will even be possible for them, especially with how challenging it can be to apply for the funding available under the PPP.

WDIV reports that one in seven Michigan businesses are certain they will not reopen as the economy reengages, becoming permanent economic casualties of the pandemic. Meanwhile, MLive reports that fewer than three in ten businesses believe that they will absolutely survive the pandemic. 

That leaves more than half of Michigan businesses unsure of their future. 

The National Federation of Independent Businesses reports that those businesses that have successfully availed themselves of the PPP funding have found success nationwide. Alongside other underutilized services like the Work Share programs that have been expanded under coronavirus relief, tools are available for those businesses who aren’t sure what their fate will be.

How Big Companies Snagged Small Business Money

The PPP was supposed to be directed at small businesses, but the details of the program were murky and the federal government’s failure to implement strong and clear rules for the PPP’s first round of loans worth $349 billion meant funds frequently flowed to large corporations, COURIER reported. 

Restaurants and hotel chains were among the largest beneficiaries of the PPP, by design of the program. 

Right off the bat, nearly 400 publicly traded companies received almost $1.3 billion in loans, according to an early independent analysis of financial record filings.

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Analysis from Vox shows that while the initial round of PPP funding awarded an average of $206,000, the vast majority of small businesses requested $100,000 or less, indicating that large businesses were drawing a massive portion of the PPPs resources. 

The continued onerous application process that is too complicated to navigate without expensive professional assistance from an accountant continues to disempower the smallest, most vulnerable businesses well into the current iteration of the PPP. 

Recent reforms did not address that. 

The Paycheck Protection Program Flexibility Act

On June 5, the Paycheck Protection Program Flexibility Act was signed into law. This helps ease the red tape that has contributed to reluctance to take advantage of the PPP. 

For instance, PPP recipients had to spend a certain amount of money within eight weeks on specific qualifying expenses. The new act, however, expands PPP’s timeline through most of the rest of the year, significantly easing the pressure on how businesses ramp up re-engagement. 

Another meaningful change is that the percent of PPP funds that must go to payroll has dropped to 60%, down from 75%. This allows businesses more flexibility on what forgivable expenses to dedicate money toward, especially if they are slowly reengaging in phases. (Though what those forgivable expenses are hasn’t changed.) 

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And the deadline for repayment of PPP loans has been extended as well. If PPP loans aren’t forgiven, borrowers now have five years to repay, instead of two years. 

“It’s clear that businesses needed this legislation,” wrote Catherine Monson, Chair of the International Franchise Association. “In order to make it through this pandemic and its resulting challenges, small businesses desperately need further support from our government leaders, as the small business community assists nearly 60 million Americans with employment opportunities. Through the changes outlined in the newly passed PPP Flexibility Act, small businesses will be able to rehire employees, acquire a steady cash-flow, and distribute funds based on their needs, not on arbitrary or unrealistic requirements.”