There is a critical change needed in the SBA PPP program – it has a 6 month loan forgiveness program based on sustaining employees on the company’s payroll. Great idea but it has hit some hurdles as businesses dig into using the money.

The nation invested close to $600 billion in almost 4 million loans to small business impacted by the Covid crisis. Around 86,000 small businesses in Minnesota, received $11 billion in forgivable loans – a massive infusion of capital which in the second round even reached some of the micro businesses. This important investment in jump starting the national and Minnesotan economy stands to lose its effectiveness unless Congress and other policy leaders intervene immediately and extend the timeline for loan forgiveness to at least December, 2020.

Business owners have shared with me factors that are at play in preventing them for tapping into the potential of the life line that has been extended to them.

First – businesses need growth in consumer demand to get their revenue back on track – however gradual or rapid the opening of the economy occurs, this demand will not happen overnight. In the best of scenarios, say in the restaurant world, 100 percent capacity is a distant goal. So the first problem is with demand – an employer can only bring in as much employees that it can sustain with revenue and if it cannot hire back all its former employee, it’s PPP loan forgiveness is of limited effectiveness.

The second challenge is with employees – the wage rate that an employer pays has to higher than the unemployment benefits an employee gets in pay. Currently for safety and economic reasons it makes sense for an employee not to go to work. So some employers cannot keep up with existing demand because of a worker shortage.

Third – we are currently in an experimental stage of opening of the economy with a lot of unknowns. If rapid infections push the economy towards another shut down, business owners need to have piece of mind.

Extending the PPP loan forgiveness time – till December, 2020 might be what is needed to keep the businesses going. Business owners want to take the risk of opening up – we need to offer them all the tools they need to survive in this time of great uncertainty.

This call for extension is resounding in the Minnesotan economy as well as nationally. Swift action is needed.