U.S. businesses need more PPP relief—with more clarity—to get through the pandemic: Our view in 3 parts

The next six months will be critical to help preserve jobs, goods, and services that we rely on every day. That’s why we support the swift implementation of more federal relief for businesses.

Rapid widespread distribution of vaccines may help ease economic concerns and the core public-health crisis. But the more than 30 million privately owned businesses in the United States also will need a longer and sturdier economic bridge to recovery. We know this from the tens of thousands of small- to medium-sized businesses we serve, the backbone of Main Street America.

Provisions that already enjoy bipartisan support in Congress could be passed and signed into law, even if others requiring extended debate or infrastructural policy must wait until next year.

There are many more contours of the ongoing pandemic response than we address here, but these short views for common-sense relief focus on the business community and its economic ingenuity that drives our economy:

1. Provide more Paycheck Protection Program (PPP) funding. ASAP.

Companies have been forced to innovate new product lines or pivot entire business models. But entrepreneurship alone can’t counteract the pandemic’s severity and scale.

We’ve tracked the urgent need for more PPP in our work, in conversations with clients, and through extensive research such as our 2020 Principal Financial Well-Being IndexSM. Nearly two-thirds of those recently surveyed expected that full recovery for their business remains at least a year away.

“This proposed round of Paycheck Protection Program funding could potentially give some Main Street businesses the relief they’ll need to keep their doors open and feel heard,” says Amy Friedrich, president of U.S. Insurance Solutions at Principal®.

2. Simplify PPP forgiveness and convert smaller loans to grants.

Entangling business owners in unnecessary red tape while trying to help them is counterproductive.

Extending PPP forgiveness to more expenses representing practical business needs (such as suppliers or facility improvements) is a step in the right direction—consistent with previous guidance that included group employee benefits as an allowable expense. An even better step would be to convert all PPP loans of $150,000 or less to grants.

That would include 88% of the 5.2 million approved PPP loans to date—showing the potentially broad impact of more simplified forgiveness. Yet these loans add up to only 28% of the value of the $525 billion distributed, which also should reassure that effective fiscal oversight of PPP can be balanced with simplified forgiveness. The leftover $138 billion from the first round of PPP itself testifies to how simplified forgiveness would encourage more business owners to use it, lifting the overall economy.

“The more we can provide relief that’s understandable and easy to administer, that provides clarity with relief, the better for businesses and communities,” Friedrich says.

In the same spirit, tax deductions for qualifying business expenses—including those paid by PPP—should be preserved. Struggling businesses shouldn’t be taxed on relief funds intended as a lifeline for their operations. The 2021 tax season will be complicated enough, given all the unconventional adjustments throughout the pandemic.

3. Target more PPP funds to the hardest-hit businesses.

The economic effects of the pandemic shouldn’t do disparate harm to businesses that may have faced slower access to earlier rounds of federal relief or lacked established banking relationships. Ideally, we’ll emerge from this crisis with a more diverse and inclusive business community, not the opposite.

Requiring businesses to demonstrate at least a 30% revenue drop in one quarter of 2020 to receive a second round of PPP funds is a practical way to try to prioritize relief. Smaller and more rural businesses and their lenders must continue to have more equitable access. Research has shown that Black-owned businesses in the pandemic have closed at more than twice the rate of white-owned firms—an unacceptable status quo.

Entire industries such as restaurants have faced extreme hardship as the pandemic erodes their core business model, requiring even more focus by lawmakers in the months ahead.

As more federal relief takes shape, Principal will help analyze its impact and continue to work hard on behalf of small businesses toward greater stability and growth in 2021. Look for our next wave of Well-Being Index survey results in early January.

What's next?

This communication is intended to be our view and opinion on proposed legislation and is not intended to be taken as a recommendation. ​

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