PROVIDENCE – The newly inked Paycheck Protection Program Flexibility Act offers what many consider much-needed leeway for struggling small businesses.
But local financial advisers and lenders say the law leaves out much of the detail necessary to enact these changes.
And whether the amendments are enough to reignite interest in the more than $100 billion of funding still up for grabs remains unclear.
The hallmarks of the bill, signed into law on June 5, are a reduction in the percentage of funding that must go to payroll costs – from 75% to 60% – and an extension in the length of time to spend the money from eight to 24 weeks.
For businesses in industries still subject to closures or strict regulations – think restaurants, hospitality and tourism – these changes are a positive step in making the program work as intended, said Mark K. W. Gim, president and chief operating officer of The Washington Trust Co.
But the ever-evolving rules governing the program make it hard for applicants, lenders and financial advisers to keep up – putting them in a “once bitten, twice shy” mentality, Gim said
Washington Trust, for example, was putting finishing touches on a series of informational materials and automated processes to aid already-approved applicants in submitting their paperwork to have the loans forgiven. Now that the terms have changed, including allowing a five-year repayment plan, the bank has to go back to square one, Gim said.
Not only do the changes increase responsibility on lenders, they also make it difficult to offer advice to customers. David Fontes, a tax partner at Blum, Shapiro & Co., said he has been inundated with inquiries from clients – both approved and considering applying for the program under the new terms – forcing him to make “best educated guesses” on the details of how the policies will play out.
Despite the good intentions motivating the new law, it’s not the ideal situation from an advisory point of view, Fontes said. On the flip side, it has upped the importance of local financial advisers to serve their clients.
“This shows why it’s so important for lenders to be both conversant with the terms and available to discuss because there have been so many different interpretations and so much speculation,” Gim said.
Whether the more-agreeable terms will lead to an uptick in new applications, which have slowed in recent weeks despite a sizable chunk of funds still available, remains unclear. As of Monday, Washington Trust and Pawtucket Credit Union reported no major increases in new applications. But Gim was not ruling out that possibility.
“All in all, we think this makes it much more likely full utilization of the program will happen and should result in remaining funds being borrowed,” he said.
Nancy Lavin is a staff writer for PBN. Contact her at Lavin@PBN.com.