At a virtual forum on Tuesday more than a dozen Maine small businesses owners joined state Sen. Heather Sanborn (D-Portland) and national economic policy experts to discuss ongoing issues with the Paycheck Protection Program (PPP), a federal initiative meant to provide payroll relief to small business grappling with the COVID-19 pandemic.
“One of the narratives that I have heard over and over again is how wonderful the Paycheck Protection Program is,” said Sanborn, herself a small business owner. “What I was hearing instead is that the program has some really deep flaws.”
Within the first few weeks, the PPP — a fund included in the CARES Act that was co-created by Sen. Susan Collins — was drained of the $369 billion initially allocated for it. Despite the stated intent of helping small businesses, loopholes in the CARES Act have allowed corporate hotel and food chains to tap into the program and receive large loans. Another round of COVID-19 relief passed by the U.S. Senate on April 21 included an additional $310 billion for the fund but did not close those loopholes.
On May 3, the Small Business Administration announced that of the $310 billion, roughly half had been allocated, with 16 percent of that funding going to businesses who applied for loans of more than $2 million, indicating that large businesses were still getting a significant portion of the funds.
Joe Walsh, owner of house cleaning company Green Clean Maine in Portland, received a PPP loan during the first round of funding. However, he explained that the program requires businesses who receive loans to be at full staffing capacity within eight weeks.
Given the uncertainty around the COVID-19 pandemic and how long businesses will need to remain closed, Walsh said that timeline won’t work for many small businesses, and the additional requirement for 75 percent of the money to go to payroll can render a business “a pass through for unemployment.”
“It does very little to actually help the business,” he said during the forum. “This gets particularly problematic if you are a high-rent business, where employees are less of the business expense sheet and rent and other expenses make up a larger portion.”
“It’s not effective for businesses that are closed or not operating at full capacity,” said Paige Gould, owner of Central Provisions and Tipo in Portland, who explained that the restrictions deterred her from applying for a loan.“That is mind-boggling.”
In Maine, small businesses make up over 99 percent of all companies. According to data from the U.S.Census, almost 60 percent of Maine’s private-sector employees work for companies with fewer than 500 employees, the sixth-highest rate among the states. Consequently, Maine’s economy and workforce are more vulnerable to shocks in the small-business economy, including the current disruption.
The program “was designed badly, and designed in a way that it has structural flaws,” said Amanda Ballantyne, executive director of Main Street Alliance, a non-profit that focuses on small businesses. “Large companies, that had the most cushion, were first in line and got the most money, while businesses on our main streets, the beating hearts of our communities, were at the back of the line.”
Photo: A closed sign hangs on the door of a cafe in Portland, Maine. | Cara DeRose, Beacon
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