by Matt Barkett

May 11, 2020

In mid-March, the unprecedented closing of America’s economy due to the novel coronavirus (COVID-19) led to equally unprecedented actions by the federal government to help businesses stay afloat. The Payroll Protection Plan (PPP) sought to help organizations – in particular small businesses – continue to pay their employees despite significantly reduced or absent revenue streams.

So, what was the plan?

Beginning on April 3, the PPP made $349 billion in forgivable loans available on a first-come, first-served basis with only a few requirements. Loan proceeds must be used to cover payroll costs, and most mortgage interest, rent and utility costs over the eight-week period after the loan is made; employee and compensation levels must also be maintained. Pretty simple, right?

What ensued was a massive rush from millions of companies to submit applications and hope their bank could get them in line fast enough to grab some of the money based on only nebulous requirements that even the banks struggled with clarifying. Within weeks the money was gone, leaving some interesting storylines behind as disclosures of the companies who received funds started to come to light.

Where things went wrong

Companies such as Shake Shack, Ruth’s Chris and even the Los Angeles Lakers were approved for millions of dollars in forgivable loans. Wait, what? The Lakers?? How could that be? Somehow, it appeared that money meant for Main Street mom and pop operations ended up in the hands of deep pocketed corporations which, in many cases, actually had access to other sources of funding that were just not as “free” as this money appeared to be.

Politicians who created the well-intended, but ambiguous, program have started calling for investigations for any organization that received more than $2 million in funds. Some of the bigger names including Shake Shack and Ruth’s Chris endured a few weeks of public shaming before simply giving the money back, weary of the negative publicity.

Meanwhile, other organizations that took money started worrying about their reputation if they were to be challenged about whether it was appropriate to receive the funds. Banks that handed out millions in loans – and received millions in fees – started asking that question as well. In the end, much is still to be revealed about how many companies or banks will be investigated, and how many loans will be deemed inappropriate and repayments required.

Should you be concerned about backlash?

Every organization that received more than $2 million should now be thinking about how they will answer questions around PPP funds if they are put under the microscope. For instance, you should be able to clearly and simply explain:

  • Why the money was needed
  • That it was indeed used to protect payroll and keep employees online (provide examples)
  • That you either didn’t have access to or exhausted other sources of capital that could have been tapped first
  • Your plan to return any money that ends up not being used
  • How you plan to account for the funds in your balance sheet in case of an audit

This money was intended to temporarily protect payroll and keep people paid while the crisis dragged on. Now is the time to assemble your story to demonstrate that your organization was eligible for and properly used the funds for that purpose. Don’t wait until investigators, media or customers start asking questions about it.

If you’d like to talk about assembling messaging for your organization’s use of PPP funds, let’s talk.


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