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Before I hit the unpopular opinion part, yes, PPP and EIDL had a lot of fraudulent applications that were approved. That said, I'll share a little of what I lea

Before I hit the unpopular opinion part, yes, PPP and EIDL had a lot of fraudulent applications that were approved. That said, I'll share a little of what I learned because my company survived losing 85% of our revenue in 2020 because of EIDL and PPP. I and my other cofounders took huge pay cuts to get through 2020 and 2021, and without PPP we would have been out of business, and 12 employees would have lost their livelihoods. > PPP loans went to "job creators", always a favorite politically-protected class. Both PPP and EIDL were to businesses. Not to individuals. PPP was not a loan program. It was a grant. EIDL was a loan, and that was the program that had forgiveness. Being awarded PPP money required that you disclose payroll data before, during and after, and if you failed to meet terms, it would be converted to a loan. EIDL worked differently, if you met forgiveness, a percentage of your loan would be forgiven (I seem to recall 60% being the cap, but I could be wrong). In PPP there were caps on the amount a business owner could claim for their own compensation as a worker in the business. > got increased tax basis in their business for the loan money they never repaid. PPP was not a loan, it was a grant to cover payroll and unavoidable (i.e. rent) expenses during the initial lockdown. The IRS initially wanted to tax that (and for small businesses, that is at the personal rate of the owner) grant amount, which would have blunted the effect of PPP by 25-30%. The Trump adminstration stepped in and told the IRS to stand down, and changed the rules to prevent that. The purpose of PPP was really to ensure that businesses did not shut down permanently. The fact is that most small business only have sufficient cash to handle about 90 days of payroll and rent. Keeping the businesses alive would enable a faster rebound, because there was a study that estimated it would take eight years to re-grow that sector if those businesses were forced to shut down.

adrr 4y ago
What percentage of PPP loans went to businesses that negative revenue impacts due to covid? PPP program was poorly structured, forgiveness should have been based on revenue impacts to the company which can be easily measured by using previous tax payments. We chose not take a PPP loan because our industry saw record growth during Covid and it wasn't morally right to take advantage of a program meant for struggling businesses. Our competitors received money even though they also had record revenue growth. We were punished for doing the right thing because that capital could been have been used to invest in the business.
- indymike 4y ago
  > We were punished for doing the right thing because that capital could been have been used to invest in the business. PPP had two goals: prevent business closures and layoffs, and stimulate the business economy (companies were cutting spending too). Yes, the capital could have been used to invest in the business, hire more people, etc, which all stimulate economic activity.
  - adrr 4y ago
    Stimulus wasn't one the stated goals. The stated goals were to help payroll with small businesses that were adversely affected by COVID19 pandemic. https://www.federalregister.gov/documents/2020/04/15/2020-07672/business-loan-program-temporary-changes-paycheck-protection-program https://www.federalregister.gov/documents/2020/04/15/2020-07... https://en.wikipedia.org/wiki/Paycheck_Protection_Program https://en.wikipedia.org/wiki/Paycheck_Protection_Program - scroll to purpose
meetingthrower 4y ago
Right, caps on owner "compensation", but profits go directly to owner at end of year as a dividend. Or as sibling mentions, as an incremental investment in the business. This was absolutely a lifesaver for some businesses (hospitality industry, small biz retail.) But for the other parts of the economy which kept working, it was absolutely free money.
- indymike 4y ago
  > but profits go directly to owner at end of year as a dividend That is not always the case. Sometimes there is no profit to pay a dividend with. In a bad year, like 2020, that is usually the case. > But for the other parts of the economy which kept working, it was absolutely free money. Maybe, but I really think the image presented in a lot of articles like this is PPP was just 100% fat cats getting an extra serving of caviar. It was estimated at the time PPP went into effect that we were at risk of losing 71% of the small business economy, and that it would take eight years for the sector to recover... which would have been devastating to GDP, taxes and so on. The truth is probably between 0 and 71%, and the recovery time could have been less. I suspect PPP will be studied in the future as a starting point for dealing with other massive natural disasters that disrupt the national economy.

adrr 4y ago

What percentage of PPP loans went to businesses that negative revenue impacts due to covid? PPP program was poorly structured, forgiveness should have been based on revenue impacts to the company which can be easily measured by using previous tax payments. We chose not take a PPP loan because our industry saw record growth during Covid and it wasn't morally right to take advantage of a program meant for struggling businesses. Our competitors received money even though they also had record revenue growth. We were punished for doing the right thing because that capital could been have been used to invest in the business.

indymike 4y ago
> We were punished for doing the right thing because that capital could been have been used to invest in the business. PPP had two goals: prevent business closures and layoffs, and stimulate the business economy (companies were cutting spending too). Yes, the capital could have been used to invest in the business, hire more people, etc, which all stimulate economic activity.
- adrr 4y ago
  Stimulus wasn't one the stated goals. The stated goals were to help payroll with small businesses that were adversely affected by COVID19 pandemic. https://www.federalregister.gov/documents/2020/04/15/2020-07672/business-loan-program-temporary-changes-paycheck-protection-program https://www.federalregister.gov/documents/2020/04/15/2020-07... https://en.wikipedia.org/wiki/Paycheck_Protection_Program https://en.wikipedia.org/wiki/Paycheck_Protection_Program - scroll to purpose

meetingthrower 4y ago

Right, caps on owner "compensation", but profits go directly to owner at end of year as a dividend. Or as sibling mentions, as an incremental investment in the business. This was absolutely a lifesaver for some businesses (hospitality industry, small biz retail.) But for the other parts of the economy which kept working, it was absolutely free money.

indymike 4y ago
> but profits go directly to owner at end of year as a dividend That is not always the case. Sometimes there is no profit to pay a dividend with. In a bad year, like 2020, that is usually the case. > But for the other parts of the economy which kept working, it was absolutely free money. Maybe, but I really think the image presented in a lot of articles like this is PPP was just 100% fat cats getting an extra serving of caviar. It was estimated at the time PPP went into effect that we were at risk of losing 71% of the small business economy, and that it would take eight years for the sector to recover... which would have been devastating to GDP, taxes and so on. The truth is probably between 0 and 71%, and the recovery time could have been less. I suspect PPP will be studied in the future as a starting point for dealing with other massive natural disasters that disrupt the national economy.