When the media talks about a “small business owner” the image you’re supposed to conjure is a salt-of-the-earth fellow who’s the can-do backbone of American industry. They’re entrepreneurs, they’re successes, they started from nothing and made something of themselves.
Horace Greeley has been dead for almost 150 years, but somehow that’s still the tenor of the conversation around a class of people who are far more likely to have come from something and made nothing for themselves.
My wife has been out of work since March 20. She’s employed as a teacher/manager at a high-end day care/preschool, and even before coronavirus hit in full, they’d been monitoring the situation closely. One reason why: Her school had a scare with a child who had visited family in Asia in late January and then upon return, sent him in before deciding to self-quarantine as a family.
On the personal side, it’s been fine. We’re so, so lucky: I’m working from home, our son is home, and with the extra $600 from the feds, my wife is making a touch more for being cooped up here than she would be at work. (Socialism!!!)
Since our state has not yet reopened — thanks still terrible but halfway competent Andrew Cuomo! — she assumed this would be the way of things for a while longer. And while a little stir-crazy, she’s always had a lot of health anxiety and is quite happy to not be out and about.
That is, until earlier this week, when the day care owner abruptly changed his mind and, via email, informed employees and parents that he was going to reopen in two weeks, setting off a frenzy of texts, messages and phone calls between worried staffers.
The reason he’s opening: He got a Paycheck Protection Program loan.
You’ve probably heard about PPP loans in the past few weeks, and here’s the skinny: They’re low- to no-interest federal loans for small businesses to keep them afloat in the short term. If employers spend 75% of the loan on payroll, they can get much of the money forgiven and the rest is a no-interest loan.
It’s a nice shot in the arm, but the strings attached are wound very tightly. Miss the spending benchmarks and it becomes a low-interest loan. More importantly, there are deadlines to use the money — 8 weeks from receipt, with a final deadline on June 30, which is its own complication since some businesses are just now receiving the money.
The goal was to keep workers employed and give businesses a boost in hopes that they’d survive the pandemic and oncoming downturn. The reality has not entirely matched that: Businesses that probably shouldn’t qualify sucked up money and a lot of service industry companies, especially restaurants, realized quickly that keeping employees on in a time with zero to low demand did not really help their long-term outlook.
Now the day care in question is at least a legitimate small business, unlike some PPP recipients. But the owner is hardly on the brink of insolvency, even in the middle of the pandemic. He owns rental property in Florida, he has other businesses, he’s got a lovely second home and a boat on one of the nicest lakes in the country. Oh, and … do I even need to say it? … he’s a big Trump supporter.
With that in mind, you’ll be unsurprised to hear that he didn’t think it through AT ALL. We’re pretty sure he didn’t realize what the rules of PPP loans are and that it could end up being a loan not a freebie. More importantly, he didn’t ask parents about their plans before announcing his reopening.
He owns an excellent day care that is very expensive since all child care in this country is outrageously pricey. What that price point means is that his clientele are upper-middle class professionals, aka the people who are most likely to be able to work from home and also generally the least eager to go out and hang with Cousin Rona.
So instead of asking who would be willing to come back, he just announced he was opening so he could start spending his PPP funds — but instead of the 100+ kids he expected, he’s going to get maybe a quarter of that.
Meanwhile, my wife’s phone blew up seconds after the email went out. Her co-workers were deeply unhappy. The owner didn’t say he would dispute unemployment claims going forward, but he was clear that he expects everyone to come back. That makes it a literal life-and-death decision for them — both health-wise and economic.
And come June 30, when that PPP money runs out? Unless a lot more parents change their mind, everyone is going to get laid off again — and this time, there may not be a federal UI bonus waiting for those workers. That, per business owners, is socialism and dangerous, while PPP money “stimulates the economy” or some other nonsense.
This isn’t going to be a picnic for the owner, either. In a decision I’m sure he’s going to consider bigger than life-or-death, he’s boxed himself into a choice that is so big I had to meme it:
It’s no surprise this guy didn’t consult with his staff; they’re cattle for slaughter to most business owners. But to not talk to his client base first or plan better about the loans? Well, I suppose money can’t buy sense.
He’s just one example, but provides a great example about getting suckered in to the discussion about those poor “small business owners.” There are some who are legitimately struggling, but more often, it’s people like him who they’re talking about getting tax relief and loans and help.
Meanwhile, the government still can’t find its way to the words “rent relief” or even a new Public Works Administration, let alone April stimulus checks that’ll be in the mail in July if the Postal Service is allowed to exist by then.
In the end, this small business owner got free government money to put lives at risk and piss his staff and clients off. It’s a decision both short-sighted and pig-headed in equal measure, made by a man with a lot of money in order to get more of it … so, very on-brand for 2020.
I’m sorry to hear about you and your wife’s current situation.
The PPP may have had a good intention behind it, or more likely it was designed to fail because it gices people binary choices: go back to work and risk your health and life for the economy, or stay on unemployment for however long your state will permit (while jumping through those hoops that were designed to discourage public use of public benefits).
Opening up businesses now is going to result in more businesses closing. The work culture of “if my employee isn’t spending every second producing profit, they are meaningless” means that business owners won’t pay people not to work. Then, when they have to close again, they are exactly back to where they started.
Your wife’s boss, and all of those business owners, are not geniuses. They go to a tax guy and move money around and sometimes buy businesses for their portfolio. So it’s no wonder our country is being run by these types.
We own a small business and were lucky enough to get one of these loans. It is very complicated, we had to get our tax accountant help us to know what we could and couldn’t do with the money. Fortunately for us, being a small medical clinic that doesn’t do COVID related testing, our staff is not in any more danger than they were prior to this. In fact, we are doing mostly telehealth now so they are getting paid for trying to contact patients to let them know we can still see them or that they are overdue for appointments and getting the same pay for less work and hours. While it doesn’t fit all businesses and I feel bad for your wife’s situation, for us we would have had to close without it. It is too bad they didn’t write this program to work for all businesses but for some it has been a lifesaver. We really should have gone w/ the way other countries are handling this and just did a UBI so nobody is forced to risk their health and forced to work. It will be interesting to see what happens after this expires and what happens next. We could be back where we started if our state stays closed through the summer.
Yeah, don’t get me wrong, PPP is way better than industry bailouts, and you can tell the SBA had their fingerprints all over the idea. You’re absolutely right that the biggest issue is it doesn’t fit most of the businesses that can’t do what you did. (And yeah, UBI is literally the best and easiest way to handle it, so of course we can’t have that!)
“and getting the same pay for less work and hours…”
So… maybe I completely misunderstood how the PPP loans were supposed to work, but I guess I thought that these “loans” which can turn into grants were all supposed to be used in the way that Loveshaq is using them…
Basically, as a bit of a pass-through, so that businesses are “paying” their employees to work minimal hours/not much at all, so that workers don’t get laid off/furloughed indefinitely, and need to draw unemployment?
I mean, it OBVIOUSLY doesn’t appear to be getting used that way… since so many big corps, colleges, etc. scooped up the funds well before the small biz’s could even apply…
But I thought that was the original intent–basically to keep folks like store employees, servers, bartenders, kitchen staff, etc. getting paychecks, wmeven though they weren’t going to be able to work their normal hours.
I guess, kinda like making those employees “temporarily salaried” so that no matter the hours worked, they still got some sort of base rate of pay? (Similar, frankly, to the way we school hourly/contract workers are getting paid–we have a prorated hourly contract, which gets broken out over the 9 mos. of the school year, and we get $____ per paycheck–right now, for MANY less actual contact hours per week)
You are correct. We are required to keep the same head count and payed hours. The biggest problem with this first round was actually getting these loans, the big banks required you to have a business banking relationship with them. We had one with Chase but we got the vibe immediately that they weren’t giving us the time of day. We found a small bank without that requirement that was amazing. The big banks gave out the majority to their largest clients so they could get large commissions on it. Most of the people we know didn’t get loans because the money ran out so quickly for this reason. Also, for some reason the red states got more loans than the blue states? Wonder why?
https://www.npr.org/2020/04/22/840678984/small-business-rescue-earned-banks-10-billion-in-fees
https://www.bloomberg.com/graphics/2020-sba-paycheck-protection-program/
Yeah, I didn’t want to get into PPP any deeper than I did, but it was very clear that banks picked favorites and big clients in the first round. The second round seemed a little better, but my favorite aunt is a bank executive and she told me a few stories that made me roll my eyes pretty hard.
I work at a small manufacturing shop that serves utilities, so we knew we were going to be deemed essential and started planning early March. All office workers now have WFH capabilities, and we gave out masks and tried to enforce distancing early.
Luckily nobody got the ‘Rona here.
We also got a PPP loan that we know we can cover because the loan amount was based on 2019 W2s and we gave everyone raises at New Year. We have a few folks who are single parents or lost childcare help who are at home but still get paid. That’s the Expanded Family Leave Act (FMLA) provisions from the earlier round of stimulus which covers up to a total of twelve weeks of paid time off on top of whatever the employee gets from the employer. The money for the FMLA pay is automatically credited from our payroll FICA and SSA taxes, so the net cost to the company here is just the processing fees.
The law’s wording on qualifying for paid leave is such that it should be worth investigating to see if you or your wife or her coworkers can use it. We have some resentments from employees who still work and think the stay at home folks are getting a free vacation. I have to remind everybody that breaking paid leave will get you in some shit with state and federal labor laws.
It’s a little tricky for them because a) it’s an essential business under NY’s rules and b) any parents claiming they won’t have child care would probably be offered it at the day care at a drastic discount because they have the room!