PPP rules loosened, but some businesses still struggle to find aid

Congress continues to expand the COVID-19 economic safety net as it becomes clear it still isn’t catching some small businesses that have not been able to secure any of the several forms of government aid.

President Donald Trump signed the Paycheck Protection Program Flexibility Act June 5, just 10 days after it was introduced in the House. As the name implies, the legislation significantly eases spending parameters for the federal government’s primary aid program to help small businesses survive the pandemic.

It loosens the restrictions on how businesses can spend their PPP funds without being required to repay them; extends the time businesses have to spend the money from eight to 24 weeks; extends the loan maturity period for businesses that do have to repay at least a portion of their PPP aid from two to five years; and reduces the amount of a loan that must be spent on payroll from 75 percent to 60 percent; among other changes.

Seeded with $660 billion over two installments, the Small Business Administration had dispersed more than $511 billion in loans — that turn into grants if the spending parameters are followed — through Paycheck Protection Program to more than 4.5 million businesses nationwide as of June 6. In Alaska, 10,265 small businesses had received more than $1.2 billion, according to the SBA.

However, those figures have hit a plateau in recent weeks. Just 215 PPP loans totaling approximately $5 million had been approved in the past two weeks, according to SBA figures, despite the fact that more than $130 billion remains available.

The state had nearly 71,000 small businesses in 2018, according to the SBA.

“The PPP has served as a critical lifeline to keep our small businesses afloat through the peak of the coronavirus pandemic. I am glad to see these common sense changes to the program pass the Senate, changes that will undoubtedly give small businesses greater flexibility and the ability to keep their workers on their payroll,” Sen. Dan Sullivan said in a formal statement.

Sen. Lisa Murkowski said the PPP changes should especially help seasonal business that make up a large share of the Alaska economy.

“It’s got to help,” Anchorage Economic Development Corp. CEO Bill Popp said of the PPP Flexibility Act.

Popp expects the changes will encourage new PPP applications and he hopes they do because he said AEDC staff has been consistently hearing from “dozens” of small business owners who previously couldn’t qualify for government aid to weather the pandemic.

“Those (initial requirements) were all just too tight given the fact that business was just shut down for a period of time,” he said.

“I’ve dealt with some pretty angry calls from people looking for someone to vent to.”

Alaska Small Business Development Center Executive Director Jon Bittner similarly said he’s heard from individuals frustrated by some of the challenges and inconsistencies in the aid programs.

Bittner said many small business owners will likely apply for a grant through the state’s $290 million AK CARES program being administered by Credit Union 1 before trying — sometimes again — to get a PPP loan because the state program is currently limited to those businesses that have not received federal aid.

SBDC staff are hearing from some business owners who have received just a small Economic Injury Disaster Loan, or EIDL, from the SBA he said.

“If you got $3,000, that’s not why (the state) was excluding people,” Bittner said.

Kenneth Wake, who owns of Prepper’s Pack, a small emergency equipment and tactical outdoor gear shop with his wife in South Anchorage is one of the emerging group of business owners who didn’t initially qualify for PPP aid; and the changes don’t appear to have helped, either.

Wake said the couple does not take regular paychecks from the business; they draw on their investment and then pay taxes off of that, meaning they don’t have the documentation the application process requires.

The couple does not have any employees.

The PPP Flexibility Act does not amend the loan application requirements.

“We can’t show proof of income,” he said.

Prepper’s pack closed March 23 and did not reopen for nine weeks.

In the interim, Wake, a former hotel security director, accepted a security job so he didn’t apply for unemployment. The state Labor Department is also requesting his wife repay unemployment benefits because the couple’s income records are not standard issue, he said.

“It shouldn’t matter how we pay ourselves to be self-employed,” he said, noting unemployment benefits have been extended to self-employed individuals during the pandemic.

Wake first applied for an EIDL of up to $10,000 and was unsure of the status of the application when a $2,000 advance showed up in his account.

However, that $2,000 in federal aid has prevented him from applying for an AK CARES grant of between $5,000 and $100,000 as well as Anchorage’s Small Business and Nonprofit Relief Grant Pilot Program.

Wake said he filled orders for protective equipment from the Anchorage Airport Police and medevac services while Prepper’s Pack was closed to the public but estimates he gave up approximately $17,000 in revenue while the store was closed.

He said their landlord forgave part of the April rent payment for the store and the couple paid part of May but they still owe for June.

Business has gradually improved in the days since Prepper’s Pack reopened, but Wake said he is still unsure about the future of the business.

“I’m hoping and praying we get through this but I tell you what I won’t be holding my breath,” Wake said.

Bittner suggested that business owners having trouble finding assistance at the state and federal levels should begin to look locally for at least some sort of aid. He noted that nearly $600 million of the $1.5 billion the state received from the CARES Act is going to local governments that are setting up their own business assistance measures.

“Those are going to be small pots of money,” Bittner said, but “There is some more funding on that level that should be easier to get.”

Officials in Gov. Mike Dunleavy’s administration have said the rule limiting AK CARES grants to those who had not received federal help was written in late April when the PPP loan pool was first exhausted. It was intended to ensure as many Alaska businesses as possible got some help.

Administration officials, House and Senate leaders have all said they want to remove the federal aid restriction for the program but it is unclear exactly how that will be done.

Wake sent an email June 2 to Sullivan, Dunleavy’s Chief of Staff Ben Stevens and the legislators on the bicameral Legislative Budget and Audit Committee, which handles out-of-session fiscal matters, explaining his situation and expressing his frustration with the requirements for the various aid programs.

He said he had not received any responses as of June 9.

Credit Union 1 had accepted 1,224 AK CARES applications through June 8, according to spokeswoman Jessica Gallagher.

Elwood Brehmer can be reached at [email protected].

Updated: 
06/10/2020 - 9:01am