Sent packing by the PPP
My Payroll Protection Program (PPP) experience was over before it started.
On the evening before the April 3 opening of the program, I’d gathered information for the application and documented payroll expenses per the language in the CARES Act, that stated:
“Payroll costs include the total amount of any compensation to (1) employees in the form of a salaries, wages, commissions, cash tips, payments for leave, severance, group health care benefits, retirement benefits, or state or local taxes assessed on employee compensation, and (2) a sole proprietor or independent contractor in the form of wages, commissions, income or similar payments not to exceed $100,000 per sole proprietor or independent contractor in one year prorated for the covered period.”
The language was a relief. My company is comprised of a network of talented independent contractors, of editors, writers, designers, and photographers who bring CompanyWeek to life each week. We’re gig professionals and entrepreneurs. If anyone needed a reminder of the importance of this segment of the economy, COVID-19 has provided it.
Yet not in time, apparently, to be sent packing. On Friday morning, as the first applications were funneling through banks, the Small Business Administration (SBA) moved the goalposts. Responding to a wave of questions about the program from confused businesses and advisors, the SBA posted its own Q&A, including this nugget:
Do independent contractors count as employees for purposes of PPP loan calculations?
No, independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan calculation.
Rejected. No employees, no payroll costs, no PPP loan. As a practical matter, the guidance killed plans that would have enabled me and others to keep a staff and payroll together, to provide certainty for gig entrepreneurs who rarely have it. Left alone, the original stipulation would have also saved the system from hundreds of thousands of additional applications from sole proprietors and freelancers.
The SBA must have feared duplicate submissions. It’s a hollow concern — and crippling distinction. I hope to have employees. But my company will always support freelancers, at least until I’m smart enough to build a media business immune to a foundation of quicksand. I’ve no idea what the media landscape holds for me in 18 months, let alone a reasonable term of a small business loan.
I do know our mission is sound. Manufacturing keeps us motivated — me and the cadre of journalists reporting on America’s innovative and lately, highly appreciated, maker community. COVID-19 is only the latest in a series of existential threats to the U.S. economy that underscore the importance of American manufacturing.
Today elected officials and wonks who do their bidding pick winners as if a command and control economy were the American norm. On one hand I support it. That status quo wasn’t working for manufacturing. I’ve argued for specific targeted tools that enhance U.S. manufacturing competitiveness and juice growth industries that would create new and sustaining jobs.
But today a new skill determines whether small business succeeds or fails — the ability to navigate a sometimes arbitrary command bureaucracy to score the grants and loans and advise that have become a variable for success.
I’d prefer my PPP failure not be a badge of honor in a losing cause.
Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.