Although funding has recently stalled, a lot of business owners are still trying to figure out what to make of the Paycheck Protection Program. Is the PPP a help to them or a massive distraction?

The "free money" phrase keeps getting thrown around a lot, and in many senses it’s not inaccurate to say that, but it’s accompanied by a fair amount of confusion about how this program operates. At the end of the day, the PPP is a loan program with the potential for forgiveness.

The idea here is they (banks and the SBA) approve the loan amount for 2.5 times your monthly payroll expenses, but give you only an 8 week period to spend the money on "approved" expenses- at which point you can apply for forgiveness. Receiving the funds looked deceptively easy on the front end, before the variety of issues in the rollouts, but owners who were successful and received funding should plan on the documentation for forgiveness being much more difficult.

The forgiveness portion will be at the discretion of the individual lenders administering the loan, though the forgiven funds will essentially be paid to the lender by the SBA. So, lenders shouldn't have an incentive to withhold forgiveness. However, one of the big hiccups in the initial roll-out of this program was that banks were concerned about some of the guaranties of the SBA- are they good for the money?- and if banks are forced to tango with the government in order to receive the forgiveness payouts, how will this impact their processing of forgiveness applications?

There is another major issue with this program- it's geared to assist with payroll almost exclusively, and in a very narrow window of time. For businesses who are operational, it could be a well-needed windfall that essentially allows them to maintain their employment levels while still being productive to some degree. Then, the forgiveness allows them to use their earnings during the covered period to boost their operating capital down the line. What about for anyone who is partially or fully shut down- those businesses who are actually being hit hardest?

This program could pose more problems than it fixes. Owners may retain the loan in hopes of forgiveness, struggle to hire back to their prior employment levels before the June 30th deadline, and then still be ineligible for forgiveness (with the funds already spent!). Best case scenario, they hire back to their prior levels and get forgiveness on the entire amount for the 8 week period, but it's just sort of an Unemployment-Insurance replacement with a lot of red tape for the owners. If they aren't productive somehow, especially earning income to some degree, it really doesn't help the business recover or increase their ability to be productive down the line.

Some of the approved expenses for forgiveness include help for debt obligations, or rent/utilities, but it's extremely limited. The program was also meant to provide support for sole proprietors but with the staggered application dates (sole proprietors weren’t able to apply for the PPP until April 10th), most of these small businesses were unable to get their applications processed before funding dried up.

Overall, I see the signs here of a "panic program", the sort of thing that sounded great (especially from a political platform), but the implementation is going to leave a lot to be desired for those who are truly small, shut down, or shut out of the funding.

What do you think? Please post your experiences or opinion on the Paycheck Protection Program in the comments!