(CNN) Even as states begin to navigate reopening, the staggering depth of the economic fallout from the coronavirus pandemic is drawing calls from increasingly desperate small business owners for changes to the massive federal program designed to keep them — and their workers — afloat.
“Basically how I’ve described it to people is it’s this gigantic pothole, and it’s dark and so you have no idea how deep, or how long it is,” Mark Harman, president of Stanz Foodservice Inc. in South Bend, Indiana, told CNN. “And you need to have something to fill that pothole.”
Harman, who not only is attempting to navigate relief funding for his own business but also through the restaurants his company serves, said he’s eager to see specific changes to the Paycheck Protection Program to try to address the unexpected length and severity of the crisis.
“They’re all decimated,” Harman said of the restaurants. “They seriously are decimated, and the PPP loan, while its intent was, I think, good, it’s not practical for what they do.”

It’s those issues, lawyers and banking industry participants say, that are driving a development that has caught just about everyone off guard: The demand for the program’s loan has in large part collapsed in the last week.
When Congress approved a second round of funding for the program after the initial $349 billion was exhausted in a matter of days — with thousands of applications still waiting to be reviewed — there was concern the second tranche would dry up just as fast, or faster.
But while money is still going out the door, the volume of loan approvals has dropped significantly, according to the Small Business Administration’s data. That is in large part due to concerns about the rules and lack of clarity on forgiveness, officials said.
Pushing for changes
Lawmakers and small business owners are now pushing for changes, including extending the period of time in which the loan money can be used and still forgiven and tweaking the requirements for the percentage that must be spent on payroll. They’re increasingly railing at the Treasury Department and the SBA for the lack of guidance on how businesses will, in the end, actually get their loans forgiven.
Lawmakers are considering several changes to the program, but the question now, as Republicans and Democrats split on the timing of any additional stimulus package, is not just what can be done, but how fast.
The Paycheck Protection Program was designed to serve as a bridge of sorts for business owners to maintain their payrolls through the government mandated shutdowns of small businesses around the country. But even those who helped draft the program on Capitol Hill acknowledge that the eight weeks given for small businesses to spend the funds didn’t account for the length of time many of those businesses would be shuttered.
“I think part of it may have to be if this is going to go longer than the eight weeks, is this now the time to address a more extended period of payroll support,” Sen. Marco Rubio, a Florida Republican who’s lead author of the program, said in a virtual town hall last week.
Republican Sen. Todd Young of Indiana, along with Democratic Sen. Michael Bennet of Colorado, recently released two proposals to address the concerns. The first would be a near-term fix to double the amount of time the hardest-hit businesses would have to use the loan money and still qualify for forgiveness.
A second, longer-term program could create a significant new loan option for small businesses that would cover up to six months of payroll and operating expenses, some of which would be forgiven based on revenue losses.
Questions about whether to participate at all
The Paycheck Protection Program got off to a rocky launch but has since kicked into gear to the tune of more than 4.2 million loans for more than $500 billion. But for small businesses facing a life or death moment, the issues are particularly acute.
“There’s more and more businesses going out of business and a lot of these people are like, what should I do, should I give it back or what?” said Laury Hammel, who owns a series of health clubs in the Northeast and Utah.
Hammel said he’s facing the conflict of furloughed employees who have access to unemployment insurance that in many cases is more generous than their salaries, at a time when most of his gyms are still shuttered. Bringing them back, when there’s no work and they are making more money, doesn’t make sense if it only means laying them off again in a matter of weeks.
“I’m not going to be doing something that my staff doesn’t want that doesn’t help the business out, simply because somebody somewhere decided it was OK,” said Hammel, who is weighing whether to give back the money rather than take a loan on his books he doesn’t want. “It’s an impossible situation.”
Lawmakers in particular have seized on the regulatory decision to require at least 75% of the funds to be used on payroll, with the remaining 25% to be used on operating costs like rent or utilities, in order to qualify for forgiveness. That, many have noted, wasn’t actually in the statute.
It’s the view on Capitol Hill that tweaks to that piece of the program can be made administratively — but Treasury Secretary Steven Mnuchin continues to suggest that a change will require Congress to act.
“If Congress wants to change that rule, I’m happy to work with Congress, if there’s bipartisan support to do that,” Mnuchin said in a CNBC interview on Monday.
SBA inspector general report
Lawmakers got backup from the SBA’s inspector general’s office late last week, which said in a report that the requirements would likely keep a substantial number of recipients from qualifying for forgiveness — a central selling point of the program.
“Our review of data from round one found that tens of thousands of borrowers would not meet the 75% payroll cost threshold and therefore have to repay the amount of nonpayroll costs in excess of 25% in less than two years,” the report stated.
The SBA responded to the inspector general by saying that it had implemented the requirement “in light of the act’s overarching focus on keeping workers paid and employed.”
Mnuchin said he was amenable to Congress making changes to the program to address concerns from the restaurant industry.
“Many of the restaurants are just beginning to open up and have said that they’d really like to hold the money,” Mnuchin said on CNBC. “They can’t do that; that’s not something we can do. But we’ll look at a technical fix.”
For businesses that are trying to use the money now, there are still significant questions over what will qualify for forgiveness — and how that process will work. The lack of guidance has infuriated lawmakers on Capitol Hill.
“It has now been more than 40 days since the enactment of the CARES Act, and guidance regarding eligibility for forgiveness of PPP loan funds is virtually non-existent,” Sen. Jeanne Shaheen, a New Hampshire Democrat who helped draft the program, wrote in a letter to Mnuchin and SBA Administrator Jovita Carranza.

With bipartisan support for potential changes growing on Capitol Hill, it’s clear there is a pathway to tweaks at some point, according to lawmakers and aides. The question, however, may be whether those changes will come soon enough.
“You’re talking to a desperate man right now,” Hammel said. “I’m in here every day, 6 in the morning till 7 or 8 at night, because I’m trying to save this business.”