HFA Seeks Changes to Paycheck Protection Program

April 14, 2020  by Laurie Northington in Business Strategy, Industry   

HFA CEO Sharron Bradley said the federal lending initiative has been implemented in ways that “will not meet the needs of our members and many other businesses.”

While most furniture retail businesses that belong to the HFA qualify for forgivable loans backed by the Small Business Administration, the parameters put in place by the U.S. Department of Treasury and the SBA will limit the impact intended by Congress. On behalf of HFA members, Bradley requested:

• Greater flexibility to determine the time when loan forgiveness is calculated.
• Greater flexibility in spending the money.
• A longer term for repayment.

The PPP offers loan forgiveness for funds used to payroll, mortgage interest or rent or lease payments, and utilities. But the details create unreasonable restrictions.

Currently, only expenses incurred during the eight weeks after the loan is received count toward the amount forgiven. Most businesses applied right away for fear the program might run out of funds. Many retail furniture stores are under mandated shutdowns. Many expect they will not be allowed to reopen until May or even June. Calculating the portion of their loan that can be forgiven based on expenses during an eight-week period when they are likely to be closed does not help them. Many stores won’t be able to resume normal operations quickly. They should be able choose when to start the clock based on when it makes sense to bring back more workers, welcome more customers into stores and deliver more products. Or the eight weeks could be tied to a date when state orders to close businesses are lifted.

The program requires that 75 percent of expenses must be used for payroll to qualify for forgiveness. HFA members have significant other fixed expenses beyond payroll. These include mortgage interest or rent/lease costs and utilities. To put a 25 percent cap on loan forgiveness for those expenses will limit the beneficial impact of the loan. Businesses should be able to apply the funds to areas that are most urgently needed for them to survive this crisis. Only businesses that survive ultimately will be able to return to full employment.

For parts of the loan that cannot be forgiven, the repayment term of two years will pose a severe hardship, as many businesses will only gradually regain viability. HFA believes a term of 10 years would be more realistic.

Howard Haimsohn, president and CEO of HFA member Lawrance Furniture in San Diego, Calif., explained the flaw in the Paycheck Protection Program’s timeframe. He expects that public health orders will keep his business closed at least into May and possibly until June – well into the eight-week period if he receives loan funds soon.

“This program won’t work for me,” he said. “It won’t benefit our company and it really won’t benefit our employees because it won’t strengthen our business. Whenever we come back, we’re going to be floundering because we won’t have access to most or all of the forgiveness of the loan. I think that’s what the intent was, to help employees and to help businesses. And we will not get any help if we are in a shutdown condition for most of the time that we have to define as our eight-week period. I don’t want to start my eight-week period until I can bring people back and start rebuilding my business, which is going to take many months.”

Bradley applauded the desire to increase funding for the PPP. But she said HFA members need the flexibility to apply loan funds in ways that best serve their businesses and their employees.

The letters were sent to Sens. Marco Rubio and Ben Cardin, chairman and ranking member, respectively, of the U.S. Senate Committee on Small Business and Entrepreneurship; Reps. Nydia Velazquez and Steve Chabot, chairwoman and ranking member, respectively, of the U.S. House Small Business Committee; U.S. Treasury Secretary Steven Mnuchin; and SBA Administrator Jovita Carranza.