Maine small businesses will have greater spending flexibility and a better chance at loan forgiveness under a new law that reforms a popular federal emergency loan program.
But the revised program still doesn’t offer a solution for businesses that expect their revenue to remain depressed for months into the future as a result of the coronavirus pandemic.
The Paycheck Protection Flexibility Act gives employers a longer timeline and more leeway to spend their emergency loans, allows for an extended repayment period and provides safeguards for companies that are unable to rehire all their employees.
Small employers in Maine received more than 25,700 Paycheck Protection Program – or PPP – loans worth about $2.2 billion in the past two months. The loans were designed to keep workers on the payroll and businesses on life support while they weathered the economic downturn triggered by the pandemic. If businesses followed the program’s rules, all or most of the loan amounts would be forgiven.
Some analysts suggest that the PPP, which delivered more than $500 billion to companies across the country, spurred job growth and kept the official May unemployment rate at around 13 percent. Inaccurate tracking of some workers means the real unemployment rate is likely more than 16 percent.
But some public-facing businesses in Maine, especially restaurants, have said the program’s structure prevented them from using it effectively. Many businesses laid off workers before funding was available and said an eight-week deadline to spend the money was unrealistic if they were unable to return to full operation in that time. Some feared if they used the money outside the guidelines, they would end up taking on a significant loan they would have to pay back at the same time their revenue had evaporated.
The reform law, which took effect Friday, is meant to address those concerns and give businesses confidence they can use the money without risking financial penalty.
“The whole thrust of this statute is to foster forgiveness, to make it easier for small businesses, to make this an outright subsidy program, not a low-interest loan program,” said Greg Fryer, a business attorney and partner at Verrill Dana in Portland.
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