Why were PPP loans not expected to be repaid – should they have been called handouts instead?
I am not here to debate the necessity of PPP loans or loan forgiveness. This question is solely about the terminology used.
The Confusion of PPP Loans
What’s in a Name?
Why were PPP loans labeled as such when there was no expectation for repayment?
Clear Communication
Could calling them PPP handouts have provided better clarity?
Relevance of Terminology
Impact of Language
How does the term “PPP loan” versus “PPP handout” affect public perception?
#PPPloan #PPP #loanornotloan #SBA #smallbusinessaid #stimulus #COVIDrelief
they were technically loans, but there was a set of rules under which the balance could be entirely forgiven if met.
There were a bunch of rules and restrictions to make them forgivable. In practice these were not *hard* to achieve, but “it’s easy” is absolutely not the same as “it’s automatic” and those rules were designed to get the money spent in very specific ways. It’s a *lot* easier and faster to administer “here’s some money, you don’t have to repay it *if* you spend it on salaries” is compared to “please convince us in advance that you can have some money if you promise to spend it on salaries and also we trust you to spend it on salaries.”
They were loans, full stop. BUT, if you met certain requirements and did certain things with the money, then you didn’t have to pay back the loan. Structuring it this way allowed the government to inject that money into the economy and to direct at certain things, like payroll expenses, utilities, and rent. If you didn’t use the money in the specified ways, you were obligated to pay it back.
There was criteria built in from the start for them to be forgiven.
The world was crazy in 2020, and a lot of stuff wasn’t very efficient. Part of the design of the program was that businesses would apply for PPP loans through their banks. Banks often had close-ish relationships with businesses- they could tell if a business was regularly sending money for payroll, getting deposits in for sales, etc. The thought in 2020 was that banks would be super efficient at getting businesses money so they didn’t fail, and money you apply for through a bank is often referred to as a “loan”.
Over time- eligibility got less strict, and a lot of people who didn’t really have small businesses defrauded the PPP program and got “loans”, but stuff happens.
They were loans, but they had a set of criteria that allowed forgiveness. So if you used it to pay your employees and your suppliers, you were eligible to have them forgiven.
So let’s say that you ask your dad for $10 to buy ice cream. He tells you that if you get an A on my math test this afternoon, then it is forgiven. It’s still a loan, he is just incentivizing you to ace your test because it’s more important than getting paid.
Two reasons:
(1) First of all, running these payments as loans backed by the small business administration allowed the money to be distributed quickly. That was a mechanism that was in-place. Anything else would have taken many months to set up.
(2) Various economists and other officials were concerned that the massive and sudden implementation of lockdowns would mean that many people would lose their jobs, and this loss would have a huge impact on the economy. The PPP loans were intended to make sure that didn’t happen, so the forgiveness was tied to companies NOT laying people off. Not all of the loans were eventually forgiven.
Easier to “give” away gov’t money to people you want when you tell everyone it is not a give away but a loan. And when it is time, you blame anyone who is gone and say boy did we learn a lesson.
My former employer got the PPP loan and furloughed us for 30 days and indicated the loan would be used to pay us for the time we were furloughed. We got back to work after the 30 days and they informed us that we actually would *not* be getting paid for the 30 days and that the PPP loan was being used to cover operational costs for that 30 days rather than on our paychecks.
Shortly after this, they started firing people because if they had laid anyone off after getting the loan, they would have had to pay back the loan with interest. So instead, they started making up reasons to fire people so that the PPP loan would be forgiven.
Because Ideologically Americans are very against the idea of “handouts.”
Whenever a handout is given, they have to come up with another word so it’s not communism or socialism.
Like the time the US treasury printed billions of dollars out of thin air to keep the country from collapsing financially, called it “Quantitative Easing” because that sounds better than “I just pulled a trillion dollars out of my own ass.”
They loaned out our tax money to help payroll. People caught on quick that they could make a minimal effort to payback and fraudulently use the money for other things.
I had a coworker, a nurse, that did exactly that. Small amount- like 40k. But still.
Our company got a PPP loan. I was the person responsible for all the paperwork.
The reason they were called loans is because that’s what they were. When we applied, we didn’t even know what the final forgiveness criteria would be. We just knew there would be an opportunity for forgiveness. Also keep in mind that most people who applied weren’t yet experiencing the impacts of the pandemic. The first round of the program rolled out before things got really bad.
So you applied for this loan, and you knew the loan would have a forgiveness program, but you didn’t know the specifics.
Fast forward a bit, and the government rolled out the forgiveness criterial. The forgiveness option we used was based around payroll. If we maintained our payroll levels during the pandemic, we could get forgiveness. If you didn’t, we couldn’t. There were other options for seeking forgiveness, but I don’t recall the specific details.
Here’s the important part though: if you did nothing, you didn’t get forgiveness by default. You’d have to pay the money back. That’s why they were loans, and not simply stimulus money.
Loans aren’t taxed.
> A forgiven PPP loan is tax-exempt, meaning it does not cause you to recognize a taxable gain or income. The IRS has clarified that expenses paid for using forgiven PPP loan proceeds are still deductible as well.
It was a handout to rich people.
Because you were expected to pay them back, *unless* you met certain criteria. And those criteria were pretty easy to meet.
But it’s just semantically easier to say it’s a loan that can be forgiven than a handout that can be clawed back.
In order to be forgiven, they had to meet certain requirements, such as making sure they were used to cover payroll. Now the government could have instead retroactively reimbursed businesses for approved expenses. However that would have delayed getting the money out, and many businesses would have gone bankrupt waiting for the check.
Love how everyone is defending ppp loan forgiveness but when it comes to student loan forgiveness “I paid my loans you should too!”
This is why America is a bad country.
They reverted to loans if a business didn’t keep to the terms.
A friend of mine has a restaurant. When COVID hit they were closed for an extended amount of time.
His choices were to fire everyone and hope whenever he could open back up, he could get staff to return….or he could take the PPP loan.
As long as a certain percentage of staff were kept and not fired, the loan would be forgiven.
It benefitted the government because had businesses fired all their staff, unemployment and Medicaid would have been overwhelmed. Also, those not fired employees were still paying taxes and jobs they could easily go back to.
It was essentially a handout, I’m sure the feds knew there would be a very abusable forgiveness system in place soon and a ridiculous low level of interest on these.
You see in the USA, handouts and bailouts are for the poors, not the owner class, they get loans in the form of handouts because…. welfare is for poor losers only.
So many people pocketed this money and abused the system its insane and most got away with it if they were smart about embezzling it.
Imagine you have a big box of cookies. Now, sometimes, if someone doesn’t have enough cookies to eat, they might feel sad or worried. So, the government wanted to help businesses so they could keep running during a tough time, like when lots of people couldn’t go to work because of a sickness called COVID-19.
So, the government said, “Hey, we’ll give you some extra cookies to help you keep your business going. But, you need to promise that you’ll try your best to keep your workers paid and your business running smoothly.” They called this help a “PPP loan.”
Now, usually, when you borrow something, like if you borrow a toy from a friend, you have to give it back, right? But in this case, the government said, “You know what? If you use these cookies to help your business and keep your workers paid, you don’t have to give them back! It’s like we’re giving them to you for free!”
So, even though they called it a “loan,” it was more like a helpful gift to keep businesses going strong during a tricky time. That’s why some people might call them “PPP handouts” instead of loans, because businesses didn’t have to pay them back if they followed the rules.
PPP was a bipartisan scam to ensure that the richest assholes in the country continued to receive blank checks for no apparent reason during a raging global pandemic. I know one of these people who received two checks totaling A MILLION DOLLARS despite their company being open and fully staffed/functional throughout the entirety of the pandemic. all pocketed without issue, both checks blindly forgiven by the current and former president
If the government says “We’ll give you a pile of money, and we want you to spend it on paying your employees” then they have to watch to see if you actually do that, and if you don’t, they’d have to sue you and prove that you didn’t in order to make you pay it back.
Instead, if they say “We’ll *loan* you a pile of money, and if you can prove that you used it to pay your employees, you won’t have to pay it back” then it’s up to you to prove you did use it that way, and if you don’t, then you need to pay it back.
Either way it’s free money, but the second way puts the burden of proof on you, which is easier for the government.
It’s just the way they were structured. It was a loan you had to pay back.. unless you did x,y,z requirements.
Originally at application they were loans to be repaid, then it was discussed to make them forgivable if you met certain criteria and required all documentations to be certified by a CPA
They were targeted mostly at business owners who tend to vote Republican and don’t accept “handouts” from “big government”. Easily forgiven loans on the other hand…