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PPP loans were supposed to be forgiven. So far, that hasn’t happened.

Jackie Laundon was already on the phone when I called her, trying to get an answer from her bank about how to get her Paycheck Protection Program (PPP) loan forgiven. She had been put on hold twice only to be shunted back to the original menu. She had no more clarity than when she’d placed the call 45 minutes earlier. It was the second time she’d tried reaching the bank by phone.

Laundon is a public health consultant in Denver, Colorado, where she works with state and local government agencies as the sole proprietor of the business she started at the end of last year. When the Covid-19 pandemic hit, two big contracts were about to end, and she wasn’t able to do the normal networking that brings in more work. The public health agencies she usually works with are all suffering from budget cuts. So she decided she needed some help to get through, and the PPP seemed like “the most straightforward” option, Laundon said with a laugh, especially if the money was essentially a grant.

Congress created the PPP when it passed the CARES Act in March, aiming to funnel billions of dollars through banks to businesses that were suffering from widespread lockdowns during the pandemic. The loans were mainly meant to cover payroll, a way to keep employees earning money while stopping companies from going under, and were designed to be completely forgiven if used properly.

But getting the $15,000 Laundon received forgiven has been anything but straightforward. She tried to find out what would be required to get forgiveness the day after she got her loan, but her lender didn’t have the information. The Small Business Association (SBA), the federal agency overseeing the program, had originally issued rules saying the money had to be spent in eight weeks, so Laundon did just that. “I was like, ‘Okay, it’s been eight weeks, where’s my forgiveness application?’”

Laundon kept checking her lender’s website over the next five months to see if there was anything about how to apply for forgiveness, but it wasn’t until early October that she was told she could start applying. By mid-October, she still hadn’t managed to submit her application. There is a deadline for applying for forgiveness: business owners have to apply within 10 months of their PPP loan ending in order to avoid having to start payments.

The SBA released an “EZ application” for PPP forgiveness on June 16, but business owners can’t submit the forms directly to the agency — they have to go through their lenders instead. And both banks and the SBA have barely gotten things off the ground.

According to the Government Accountability Office, the SBA received only about 56,000 decisions on whether to forgive loans from banks by September 8 — which amounts to just 1 percent of the 5.2 million loans issued. None had actually been forgiven as of October 1. Meanwhile, the SBA issued new information and rules on July 23, August 4, and August 11, and it still hadn’t finished creating a process for reviewing lenders’ decisions as of August 14. On October 1, the SBA said it would start forgiving loans after banks and borrowers complained.

Laundon is not the only small business owner anxiously waiting for the chance to get her PPP loan forgiven as the process drags out. In a survey of 93 small business owners conducted in late September that was shared exclusively with Vox, the Main Street Alliance found that 39 percent have tried to start the forgiveness process, but have been told their banks aren’t ready. More than one-third are worried that the lengthy process leaves them sitting on potential debt, affecting their creditworthiness. There is a lack of clarity as to whether PPP loans will be taxed as business income or as an expense, leaving year-end tax planning more complicated.

Minneapolis-based Kevin Brown, owner of print service company Smart Set, scrupulously followed the program’s rules, spending his $35,000 PPP loan on payroll and other expenses as allowed and within the right time frame. “And then it was like, ‘Okay what’s next?’” he said. “The answer was, ‘Good luck, you’re on your own.’”

As soon as the SBA published paperwork for forgiveness, Brown downloaded it and spent three hours going over it with his bookkeeper. They didn’t even finish, but they were able to make a list of all the documents they needed and fill out the application. At the end of June, he contacted his banker about what he should do with the paperwork. His banker told him not to send it in yet. That was the last time he had any communication from his banker about PPP forgiveness.

“I’ve never asked for charity from the government,” Brown said. “I’m very much committed to holding up my end of the bargain. But at some point it’s like, what’s the government’s end of the bargain?” While he waits to submit his forgiveness application, he’s holding off on buying a new piece of equipment that he had been set to buy in early March.

Back then, Brown had spoken to his banker about rolling over a loan for a different piece of equipment that he just paid off into a new one to cover the cost. Now, as he’s facing his busy season in November and December, he’s eager to actually buy it. But Brown has a $35,000 outstanding loan on his books, so his banker can’t issue the new loan, even if they both know the PPP loan should be forgiven.

Davis Senseman, an attorney who works with small business owners in Minneapolis, had assumed they would already be wrapping up work with clients to get their loans forgiven by now. Instead, they have clients who call and anxiously say that they’re watching interest accruing on their PPP loans. “It’s so hard to say to them … ‘We can’t do the forgiveness yet,’” Senseman said. Others have decided not to use the PPP money in case it’s not forgiven. Some clients have even held off on calling employees back to work.

Senseman is also waiting to apply to have their own $16,500 PPP loan forgiven. They applied after realizing that all of their small business clients weren’t going to be able to pay them for work done in January and February as businesses shuttered in March. They precisely followed the program’s rules. Still, they said, they aren’t “100 percent sure” that the rules won’t change again. “It takes an emotional toll,” Senseman said. “I would like this debt that should not be a debt to not be a debt.” And if it does turn into debt, even partially, it would be a “burden,” forcing Senseman to start demanding payment from clients who still can’t pay.

Michael Fusco-Straub, the co-owner of bookstore Books Are Magic in Brooklyn, New York, still hasn’t been allowed to apply for forgiveness for his $100,000 loan. He was told in July that it would start in August; in August he was told September; in September, October. When we spoke in October, he said the last he’d been told was November. He’s assuming that “their goal is not to forgive it,” so he is planning to do everything he can to do it absolutely right. It would be a hardship, he said, if it weren’t forgiven.

For Laundon, the delay in getting forgiveness means that she’s not using her PPP money the way it was intended. “I have been pinching pennies,” she said, to make sure she has $15,000 in case she has to pay it back. She’s been marketing herself for smaller research projects outside of what her business is supposed to focus on in order to make more income. She’s held off on getting a customized email suite and setting up her own website to build more business. She can’t take the classes she would normally invest in to get her higher certifications and allow her to charge higher rates. “Anything I feel like I can cut back on, I’ve just cut back on,” she said.

Even once the forgiveness process truly gets underway, many business owners aren’t sure exactly what paperwork will be required of them. Sixty-eight percent of the Main Street Alliance survey respondents were concerned that the process wasn’t clear, with two-thirds saying they don’t understand what’s eligible for forgiveness given the many changes in the program, and over half were confused about what documents are required. The details matter: About two-thirds fear not getting their loans forgiven, while 43 percent are concerned they won’t have any recourse if they feel a decision isn’t fair.

It wasn’t too difficult for Laundon to apply for a PPP loan: She submitted profit and loss statements from January and February of this year, the months when she actually had income. She was hoping the lengthy delay in her bank allowing her to apply for forgiveness was due to the bank setting up a portal that would make that process easy as well.

Instead, her bank told her that she needs to submit different documentation to be forgiven: It wants her to send a Form 941, which small businesses with employees submit to the IRS to show taxes withheld from workers’ paychecks, and a Schedule C form for 2019, which sole proprietors file with the IRS at tax time. But she has no employees and was only in business for four weeks last year. She hadn’t started making money but had startup costs, so she had a loss for that time period.

Each time Laundon sends an email explaining and asking what she can submit instead, she gets a form response telling her she needs to send a 941 and Schedule C. “The right hand is not really working with the left hand, and no one really seems to understand what is needed,” she said.

Laundon has resorted to looking at the SBA’s website and accounting blogs to try to figure out what her lender should be asking her for. “This is a lot of unpaid time that we’re spending on trying to provide this documentation,” she noted. “I’m someone who likes to make sure all of my Ts are crossed and my Is are dotted. I just want them to be very clear about what is needed.”

Brown’s situation is more straightforward. And yet even he’s unsure, once he’s able to submit his forgiveness paperwork, if it will be wiped clean. The program required business owners to spend 75 percent of the money on payroll, but it was never explained if it had to be on the same employees for the same hours as pre-pandemic, or if things could be shifted around — which is what he ended up having to do with his employees. Even his banker didn’t know the answer. If it’s not forgiven, he said, it “would be pretty catastrophic.”

“The whole thing has just been hilariously poorly executed,” Laundon said. “But it’s incredibly unfunny because this is people’s livelihoods.”

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