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Small Businesses Save Up, Negotiate Rent, and Adopt Other Safeguards In Case PPP Forgiveness Falls Through

  • Small business owners who took out a Paycheck Protection Program loan are taking steps to shore up their finances in case they end up on the hook for repayment
  • Few forgiveness applications have been submitted as borrowers and lenders wait to see if further guidance or automatic forgiveness is forthcoming
  • PPP has received some criticism for complications and uncertainties, which caused some business owners to return loan money or avoid applying

While the Paycheck Protection Program offered companies a lifeline to avoid shutdown during the economic stagnation brought on by the COVID-19 pandemic, small business owners are now anxiously waiting to see if they’ll need to repay their loans.

The Treasury Department intends to start the PPP loan forgiveness process this week, though the Small Business Association has only received forgiveness applications for about 2 percent of the approximately 5 million loans totaling $525 billion that were disbursed. Most business owners and lenders are waiting for further clarity or developments on the program, including the possibility that Congress may automatically forgive loans below a certain threshold.

A loan might be completely or partially forgiven, or a business owner may be required to repay the funds over five years if they have not met the program’s requirements. Although Congress loosened PPP rules to given businesses more flexibility on how to spend the funds, business owners have also been concerned about the complexity of the forgiveness process. The program quickly ran out of initial funds, but $130 billion of a second round of funding remained unspent after business owners balked at the shifting loan terms or even returned the money out of fear that they might risk a substantial debt if they mistakenly did not comply with requirements.

Some business owners have taken steps to prop up their finances in case they find that some or all of their PPP loan is not forgivable. These include saving up money or renegotiating the rent on their office space.

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