These are loans. They are two year low interest loans. They have to be paid back unless some or all is forgiven. Forgiveness requires documentation on employees retained, wage history, and is capped at $20k/employee maximum. And of course a piece of that comes back to the government in terms of payroll taxes. Just because a company took a 1M loan, doesn't mean it will be 100% forgiven.
For those complaining the companies don't "need" the money - I know many households who received $4k+ in stimulus checks that didn't need it. Should they not have taken it?
And anyways, the whole point of this program was to get money to businesses quickly. Means testing takes time. Sure there are going to be some questionable loans. Some fraud too. But overall our government has spent a lot more money and gotten worse returns than the PPP.
This is a highly politicized way to frame PPP loans. Its more like: "These loans are forgiven, unless you scammed the government." These loans were specifically designed to be forgiven, a minimum of 75% of the loan was to be for payroll and if used for payroll (what it was supposed to be used for) that portion of the loan will be forgiven.
>Just because a company took a 1M loan, doesn't mean it will be 100% forgiven.
Again this is so carefully worded to send a false signal...true "it doesn't mean" it will be 100% forgiven. But again the goal is for at least 75% to be forgiven up to 100%. The idea is businesses were supposed to get a loan with 75% allocated to payroll expenses and the extra 25% to approved non-payroll expenses (example: rent) and the portion used for payroll should be 100% forgiven...which in many cases will be the full amount of the loan, because many businesses didn't add an extra 25% for non-payroll expenses and just took the forgivable payroll portion.
Basically the only reason/way these loans would be repaid is if business took out the loans and spent the money on non-payroll expenses...that should be fraud and result in jail not a nice cushy 1% interest rate for people committing fraud.
So it kind of irks me to see some people frame this like a large percentage of these loans will be paid back. Not only is that not the case, it was never intended to be the case.
I constantly see this..."its not free money, its a loan, and the money will be paid back with interest, just like in 2008."
No, its free money for businesses, many of which will fail and let their employees go anyway.
Then you hear people claim how somehow it was a victory to keep people off unemployment for 8 weeks, but not a single person can explain why that is such a benefit. Its sort of like saying hey when Corona virus began I stopped flights from Country X and saved 10's of thousands of lives...maybe deaths were delayed but there is no evidence they were prevented.
If it goes to salaries, those salaries are taxed (both payroll taxes for the employer and income taxes for the employee).
Those salaries, for the most part, get spent - on things with sales tax, creating business profits that are taxed, and supporting the employment of employees' whose wages are also taxed.
The idea that it's one giant money suck for businesses with no immediate return to the economy is not really accurate - it's not a zero-sum game.
No one argues $600B wouldn't help the economy. Can you point to where I said PPP will not help the economy?
Most people are starting to understand the fraud involved with PPP and understanding those funds could have gone to individuals and the money would have found its way back into the economy just the same...only faster as its not distributed out over 8 weeks with 25% reserved for non-payroll business expenses.
Of course there are arguments for why the money should have gone to businesses as it did and not people...but you don't hear any lawmakers making those argument publicly and if you do its limited to "we are saving jobs." My argument, if you feel compelled to call it that, is that there is no proof these jobs have been saved unless delaying unemployment by 8 weeks is considered a job.
how could this possibly be true? the economy started tanking because people stopped going out and spending money. giving people money wouldnt fix this.
People continued spending money...mortgage/rent; car loans/insurance; food; etc...
>giving people money wouldnt fix this.
PPP didn't fix it did it?
There is an eviction and foreclosure crisis looming...giving people money may have done a better job than PPP in avoiding this coming disaster.
i must be misunderstanding. surely you're not claiming that ordering people to stay inside and restricting building capacities didn't severely lower business revenue, are you?
> PPP didn't fix it did it?
i dont know why you said this. the PPP almost certainly fixed the short term problems created by a national quarantine. we're not out of the woods yet, but what do you think happened to all the money? you think hundreds of thousands of small business owners simultaneously committed fraud and didnt use the PPP for payroll? the PPP gave people money for rent, how did it not?
If you do nothing and let tons of businesses close, then there's a huge chunk of the machinery of the economy missing once you start loosening the health regulations.
Yes, if a company spent 60% (down from 75%) of their loan on payroll, and does not exceed the 20k cap per employee, and retained the same number of employees they had at the beginning of the covered period, and can document all this, and they followed the initial SBA guidance when deciding how big of a loan to apply for, then they will get most or all of the loan forgiven.
There are lots of comments here about "what about the nail salon who has 14 employees and took 5-10M?!?!". Well, assuming that isn't just a case of bad data, there is no reasonable expectation that the loan will be forgiven in it's entirety. The majority will need to be returned to the lender plus interest.
If true that is an obvious case of fraud and you are making my point, the only time a loan will be repaid is if the money was spent on things other than payroll...which amounts to fraud.
Who cares if its a nail salon? Math is math, if you have 14 employees the maximum eligibility would be 8 weeks of payroll with a cap at $100k salary + up to an addition 25% for non-payroll expenses. $5-$10M for a business with 14 employees is fraud on its face.
I don't think you know that many people then. I don't know a ton, but everyone I know is expecting to get 100% of the loan forgiven. Main reason being you just need to show that money is spent on payroll, mortgage interest and utilities. For a lot of businesses it isn't that hard to shift accounts around to show those costs are higher than their PPP amounts.
That was my entire point is that the loans were designed to forgive a minimum of 75% of the loan, but it is 100% forgiven if they limited their loan application to 8 weeks of payroll.
All the people you know took 20% more for salary than they were supposed to and they should pay it back. Even based on your personal experience you should know this isn't the way to describe the program:
>These are loans. They are two year low interest loans. They have to be paid back unless some or all is forgiven.
Rather in your personal experience most of the loans will be 80% forgiven.
Overall though I’d expect 75-95% of program funds to be forgiven as they have extended the time window from 8 to 24 weeks making it much easier to use all funds in a forgivable way.
Where did I say that?
What do you call a loan that you still owe? A loan. Once the forgiveness guidance is finalized and people are actually receiving it, then perhaps I will recharacterize my description.
This is what I meant by political couching: Do you know any one who has paid back a single dollar?
>These are loans.
Fine care to loan me $1M and I'll pay you back 20% with interest.
And how often do they have forgiveness terms?
I'd be shocked if someone somehow got something that egregious through.
I'd rather have some of the waste money going to families over businesses for once. Families have to worry about loss of income and loss of health during this. Businesses just have to worry about income. Families are more fragile and should be prioritized.
I am totally with you when it comes to companies with deep pockets but a lot of very small businesses are really just a group of individuals trying to survive together.
The virus wasn't any company's fault. The choice to respond to the virus by shutting down the economy wasn't any company's fault.
Previous epidemics in human history have been dealt with by simply accepting a death rate that modern society, via government policy, has chosen to not accept. This was an unprecedented response that no business could have predicted.
Why do so many of us view businesses who pay employees as the enemy? Agreed 100% on the fact that many of us on this board got stimulus checks that were later spent on mountain bikes or other luxury items. Members of the privileged keyboard class didn't need them at all. People who work with their hands ought to be pretty pissed off they simply didn't get double what they got while we received nothing.
Would it be better to let the city burn down today because we're worried about a water shortage in 100 years?
What's strange about that is that there were/are so many unknowns. Sure, you could be booming, but what if the unexpected strikes and you are suddenly not booming due to yet another unforeseeable event? The worst estimates were that millions would die and we'd be heading into an era that would eclipse the great depression.
As prepped as you were, and as well as you were doing — taking every opportunity to add layers of resilience would seem like the smart thing to do, especially when you've got employees with families, customers that depend on you, etc.
Look at this: in 2019 Delta Airlines spent around $2b buying their own stock . They also spent $300m buying their own stock in March 2020. In April 2020 they received $5b in government assistance . What if instead of spending billions of dollars to improve their stock price, they saved some of that money in case they ever had a crisis to deal with?
It's not like this is the first time the airlines have been bailed out before, either. 9/11 wasn't that long ago.
The thing is, if we don’t want to help companies that conduct stock buy backs during times of plenty, then need help during times of famine, 1. The time of famine or pandemic is not the time to fight that battle. Let’s revise stock but back law later. 2. Honestly, no policy can be designed to handle a global pandemic. This is not a normal time. Let’s leave the blame and moralizing for a few years from now.
Stock buy backs used to be illegal. Maybe they should be again. Or maybe only after a company has passed a financial stress test.
The thing is, the more we design the system for these unexpected edge cases the more complicated it gets. Maybe it just be better to have something like FDIC insurance that all companies buy and kicks in automatically.
I seriously considered not cashing my stimulus check until I talked to multiple well off people that cashed their dead relative's checks. There just isnt a cultural expectation in the US that you wouldn't take what you're given.
EDIT: Rethinking my comment I'm giving myself too much credit. Since I never got a physical check, I couldn't have "not cashed it" if I wanted to.
Unless there is some weird allowance (widower/widow inheritance, etc.) wouldn’t this be straight fraud?
I know in some countries people don’t report their relatives’ deaths in order to keep receiving their benefits, but obviously that’s illegal too.
In a sense, I am glad it is getting some scrutiny as clearly people who did not need the money benefited ( likely at the expense of people who really needed it - the currently public fraud cases are pretty amazing already ), but I am worried that this kind of scrutiny will make people hesitant to apply in the future just to avoid the headache.
> Q13. Why did the IRS send Economic Impact Payments (EIPs) to deceased individuals? (added June 26, 2020)
> A13. Upon enactment of the CARES Act, the IRS worked with unprecedented speed to issue Economic Impact Payments to individuals. The IRS initially implemented the legislation consistent with processes and requirements used with the 2008 stimulus payments, which resulted in EIPs being issued to certain deceased individuals. After further review, it was determined that such persons are ineligible, and the IRS has taken action to prevent future payments to deceased individuals.
I'd think if the estate is still open, it'd get rolled into that as income legally.
There's lots we could have spent the money on, but we didn't need it - we've had to go without meals before, this wasn't that.
I think one can easily justify taking the money when you don't need it. Possibly the most moral action would have been to take it and help people who couldn't get the help and really needed.
We've had no problem taking charity, still most of the kids clothes are hand-me-downs from other families; and I don't see income support as charity per se, and we take income support of other types not related to being jobless.
The "you've paid in" argument would probably not be on our side either.
Maybe that fleshes things out anecdotally.
I wouldn't judge a program because of people committing outright fraud.
"Need" is probably not the way to look at this, anytime there is "free money" there will be incredibly wealthy businesses and organizations with "need." There is a school of thought that you should "always need" free money. I think that's just business. I think the actual distribution is where you look.
It would be completely foolish, ATMO, to believe that every organization, bank, and business were treated equally or fairly in this process. We already know that banks like Cross River handled what appears to be a disproportional amount of the approved "loans," presumably because they are a slick fintech business. When the dust fully settles, I would be shocked if the distribution of the funds or the forgiveness was in any way egalitarian, the country just isn't. I fully expect that it will be another mechanism in which certain classes benefit from the US system and others will have been overlooked. And maybe there will be another excuse, minority owned small businesses may not have been as "well banked" as others or something and your choice of bank will be another differentiator. I've heard a couple stories of orgs that didn't even get applications from their banks until the fund was depleted. There will be some great success stories too, I'll reiterate that I think the program is based in good intentions. I just can't see it being executed fairly though, not when they're actually debating on whether the Bubba Wallace noose was a "hoax" or not and the president chimes in...
Only owners are capped at $20K. Employees are capped at $46K over the 24 week period, which works out to be that any employee making $100K or less annually is full covered under forgiveness.
After the SBA guidance application volume dropped off a cliff so the SBA, backpedaling, issued new guidance that they wouldn’t audit loans under $2M, but by then no one wanted to take the risk.
It’s important to note that the SBA issued its announcement after the public outrage of large companies receiving PPP. They have since back tracked and issued a blanket protection from audit for loans under $2M but the damage was done and the $130B hasn’t been touched since.
anything I can read about that?
There are estimates that we actually need a second PPP of the same size ($600B) because lock downs are going to start again.
They allocated 350bn, it all got spent.
Then they allocated more, and some of that second round of money is left.
I think your misunderstanding is that the rules actually get followed. What happens when everyone in the scheme comes back and says "the economy is shit, we can't pay that regardless" or more optimistically businesses that have 100's of employees that simply plea with the government that they can't repay their loans, but should be given 100% forgiveness in the spirit of "keeping unemployment low". It's far too political to introduce/enforce anything that makes unemployment numbers worse. It's like a "too big to fail" on a much larger order of magnitude.
> the whole point of this program was to get money to businesses quickly. Means testing takes time. Sure there are going to be some questionable loans. Some fraud too. But overall our government has spent a lot more money and gotten worse returns than the PPP.
I consider rape less evil than murder so hey I guess I shouldn't be so critical of rapists! Look, I know those things aren't totally analogous, but the point is that it's OKAY to be critical of the government, especially when a government program benefits those who need it the least.
Let’s tone down the rhetoric a bit, in no way are PPP loans close to rape or murder in magnitude of harm so it’s an inflammatory analogy with no purpose.
In terms of the actual problems with PPP and percent of bad loans. Think of the counter factual. Would you rather have 1% bad loans or a wave of bankruptcies and layoffs triggering a depression that last 10 years? What about 10% bad loans? 50%?
The PPP was well designed and administered under the circumstances. Let’s make improvements because we are not out of the woods yet. But let’s not scape goat or focus on the edge case problems and then destroy all of the benefits prevented harm.
And yet those businesses either didn't get the loans or got a minuscule amount comparatively speaking (especially to those who knew how to game the system).
> in no way are PPP loans close to rape or murder in magnitude of harm so it’s an inflammatory analogy with no purpose
It was meant as a comparative analogy (murder to rape, as PPP to <whatever is worse>) not from (rape as to PPP, as murder is to <whatever is worse>). That was my purpose - two bad immediately recognizable crimes in society with one being considered worse.
> Would you rather have 1% bad loans or a wave of bankruptcies and layoffs triggering a depression that last 10 years? What about 10% bad loans? 50%?
I'd rather have a civil debate about whether that's effective (see Japan's lost decade for comparisons of why quantitative easing has even longer potentially more disastrous issues). You're kidding yourself if you unilaterally think that the PPP program is the only way to alleviate yourself from a "wave of bankruptcies and layoffs triggering a depression that last 10 years". Again, we're just kicking the can down the road, like we always do.
Yes and ?
Married couple with up to $150K AGI ($2,400) + 4 dependent children ($500 × 4) is $4,400.
> if a 24-week Covered Period applies, does not exceed 2.5 months’ worth of 2019 compensation for any owneremployee or self-employed individual/general partner, capped at $20,833 per individual; and
> if the Borrower has elected an 8-week Covered Period, does not exceed 8 weeks’ worth of 2019 compensation for any owner-employee or self-employed individual/general partner, capped at $15,385 per individual.
RIPE for favoritism, aka, corruption.
Corruption and fraud are certainly possible - though the lenders got paid from the government just for originating the loans. That is, they already made their money. There's no extra money in them over-forgiving a loan.
Source - applicant for 4 separate, PPP loans that were eventually awarded.
Banks are not stupid. They awarded funds first to their clients that had outstanding loans with them. That meant the banks' own portfolio was not impaired, thanks to influx of PPP