Will small businesses eventually write off their debts under the Paycheck Protection Program?
The Paycheck Protection program was launched in April 2020, allowing borrowers to receive lent money to pay salaries to their employees (even if they’re cutting some amounts in their payrolls to keep the business afloat after nose-dipping). The program supposes that borrowers and lenders can write off these debts in 6 months after lending that money but Congress later revised the rules, prolonging the term up to 16 months. That means that borrowers are able to submit the requests to write off these loans up to mid of 2021.
The writing off is not a simple task, however, as up to now, no rules for the process of application, consideration, and writing off were actually submitted on the governmental level. There are some general requirements like attaching all payrolls to the application so credit organization could see that money was spent on paying salaries and other regulated expenses. However, the rest of the scheme is completely gray. And even if executed as it is today, it would take 3 times more time to make write off than to approve lending. Also, there is no certainty on what to do with businesses that went bankrupt after receiving the lent money – to allow or deny them. Will there be any automatic write-offs?
That’s why despite many loans are due date now and some thousands of applications have already been submitted all over the country, zero applications have actually been approved or denied since there are no clear rules of the game.
70% of all loans in this program are below $50,000, whilst over 90% are below $150,000. The total sum is equal to 525 billion dollars and counts over 5.2 million pieces of loan.