PPP reaches a critical point for SMEs

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Small businesses across the country face an ignominious anniversary: ​​Almost a year has passed since the first round of closures linked to the pandemic that began last year in California on March 19. What started in California quickly spread to all 50 states as state and local government. launched stay-at-home or shelter-in-place orders that shut down non-essential businesses in hopes of slowing the rapid spread of the novel coronavirus.

COVID-19 continued to spread, although closures combined with warmer weather slowed it down for some time. But the mainstreet economy across the United States came to a screeching halt as foot traffic evaporated overnight, cash flow pain set in, and entrepreneurs began scrambling for understand how they were going to survive.

And while Paycheck Protection Program (PPP) loans were rolled out last year to help small and medium-sized businesses (SMBs) and their employees better know if the storm hits, according to the latest data from PYMNTS, The 2021 Main Street Business Survivor Study: Understanding the Profile of Main Street SMEs that have weathered the pandemic fallout, these small businesses look less for the second round of the PPP, currently being rolled out, to keep doing them pass. Only 16% of Main Street businesses say they have actually requested such help in the past three months, compared to an average of 21% since March 2020.

It’s not that the need is still not there – the latest research from PYMNTS also shows that 12% of all Main Street SMEs have closed permanently since the start of the pandemic, in fact, and 45% of those who remain believe they could be at risk of closure in the near future. The damage was real and the effects and fear engendered by the pandemic period are lasting.

These merchants do not fail to be proactive about their survival. Data shows that SMEs are changing their product offerings, migrating to digital channels, and restructuring their job offer in terms of what they do to survive today – and, hopefully, the data shown will thrive tomorrow. .

Progress of PPP

Adopted In December, the second round of the PPP opened in mid-January for SMEs that did not apply the first time or needed an additional allocation of funds. Similar in structure to the loans of the first round, the second round offered additional advantages to players in the restaurant and hotel industry, a lower loan ceiling and new requirements for companies applying for their second loan.

Companies were also allowed to reapply as long as they had 300 or fewer employees, used or will use their entire first allocation of PPP funds, and can show a minimum 25% drop in gross revenue over the course of of any quarter of 2020 compared to the same quarter in 2019.

These new requirements, according to data from PYMNTS, have slowed many companies to apply for another injection of PPP dollars, but they were not the only reasons – companies polled by PYMNTS presented various reasons for not applying for loans. PPP.

Nineteen percent of surviving businesses haven’t applied for PPP loans in the past three months because they’re worried about the implications it might have on their future taxes, while 11 percent just don’t know. whether they will generate enough income to repay the funds.

Lack of knowledge also appears to be a fairly significant issue as 17 percent of surveys of traders indicated that they were unaware that such loans were available.

And this shortage of traders after the last round of PPP funding ends in layoffs – survey respondents, especially those making less than $ 500,000 in earnings per year, are laying off workers instead. Some 14 percent said they chose to lay off their employees instead of applying for a loan.

The hope of pushing more traders towards PPP has prompted some groups, like the American Institute of CPA, to push for expansion the deadline to apply for the Check Protection Program loans and change recent directions. The AICPA argues that the March 31 deadline is unrealistic and creates unnecessary angst for small businesses and their accountants. And that pressure for an extension is growing stronger as more people join it, especially following a rule change that has allowed sole proprietors and on-site workers to enjoy the program more easily.

Today, the country’s bankers say the program should be extended until April, to give them enough time to adjust to the amended guidelines and ensure that everyone eligible for a loan can apply.

An optimistic outlook

Nineteen percent of Main Street Survivor business owners who haven’t applied for P3 loans in the past three months haven’t because they just don’t need the money. Almost one-third (31 percent) of Main Street survivors who earn more than $ 2.5 million in annual income haven’t applied in the past three months because they feel financially stable enough to not need PPP loans.

Main Street SMEs continue to be optimistic about how long the pandemic will continue to reduce their pedestrian traffic according to PYMNTS data. Overall, Main Street businesses that are still open believe consumers will feel comfortable re-engaging in the physical world by the end of October 2021, in just seven months.

The perhaps worrying part of this statistic is that it is significantly earlier than consumers expect to return to stores – in February 2022. That leaves a gap of about four months between when survivors of Main Street believe their foot traffic will recover and when their customers expect the impact of the pandemic on their lives to end.

A positive outlook is good and maybe even necessary given what a tough year businesses have had. But given the number of flights without further infusion of PPP funds, perhaps a little more caution is warranted.

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