Half of PPP borrowers may need additional support over the next 12 months

by Clay Jarvis02 Nov 2020

A new survey from the National Federation of Independent Business found that more than half of Paycheck Protection Program loan recipients expect to need additional financial support in the next 12 months if economic conditions don’t improve.

“This has been a difficult year for small businesses and many of them are still struggling to survive,” said Holly Wade, executive director of NFIB’s Research Center, in a statement accompanying the survey results.

Wade said it is clear that America’s small business community, which generates almost half of the country’s GDP, requires further financial assistance to keep their doors open.

“Small business owners are working hard to manage the health and safety of their employees, customers, and themselves while operating their business and complying with local mandates and regulations,” she said. “Despite the current political climate, small businesses need Congress and the Administration to act on pro-small business legislation that would ease the financial burden COVID-19 has put on their business.”

According to the survey, the NFIB’s thirteenth such study since the beginning of March, 52 percent of respondents said they anticipate needing additional financial support over the next year, with 75 percent saying they would either apply or consider applying for a second PPP loan, figures that were virtually unchanged from the month before. Nineteen percent of PPP borrowers expect having to lay off employees in the next six months.

When asked how long they will be able to operate their businesses under current conditions, 62 percent of respondents said they expect to survive for at least a year. Five percent said they may be forced to shutter operations in two months or less. Thirty-four percent anticipate closing down in less than a year if their local economies don’t improve.

Confusion appears to be afflicting many PPP borrowers as they move into the forgiveness stage of the loan process. Thirty-nine percent of respondents say they don’t know which forgiveness application form they will use, which Wade attributes to a combination of misinformation and complicated eligibility criteria. Twenty-two percent said they don’t know if their PPP covered period lasted eight or 24 weeks. Two percent said they don’t know if they’ve spent all of their PPP funds.

Wade told MPA that the confusion could partially be the result of a lack of forward movement with processing PPP forgiveness applications among many borrowers and lenders.

“Some banks are still waiting to see if Congress allows borrowers with loans of $150,000 or less to use a simplified form, and some banks aren’t yet accepting because they are still developing web-based application portals,” she said.

Only 26 percent of respondents reported having submitted their PPP loan forgiveness forms, while 34 percent said they are not ready to submit an application. Thirty-nine percent said their banks are not accepting applications even though the respondents are ready to proceed.

The survey found what appears to have been woefully insufficient messaging around the Employee Retention Credit, a refundable tax credit available to employers who did not receive a PPP loan. Even though 23 percent of respondents reported not receiving a PPP loan, zero applied for the ERC.

Questions around the spread of COVID-19 shed light on the country’s current pandemic catastrophe. Despite the number of infections rising in almost every state, thirty-six percent of respondents said they are “not at all concerned” about contracting COVID-19. When asked about their employees contracting the disease, 17 percent said they, too, are “not at all concerned.”

But getting a handle on the crisis is necessary for businesses to get back on their feet.

“Those small businesses most negatively impacted are in desperate need of additional financial assistance to help them through the remainder of the health crisis,” Wade says. “About 20% of small business owners are operating at sales levels that are less than half of what they were pre-crisis. It’s a dire situation still for many, and that likely won’t change until the health crisis is largely over.”