Sometimes we really do learn from our mistakes!

I remember hearing a presentation years ago that the United States should not have allowed Lehman Brothers fail. Certain pundits would suggest, right or wrong and not to be debated, that this event was at the heart of the 2007/2008 financial crisis.

Heading down the same path, but for a totally different reason, on April 3, 2020, the United States government authorized and approved the Paycheck Protection Program (PPP). It made $349 billion available and in less than two weeks, on April 16, 2020, the funds were exhausted. The government approved an additional $320 billion and that was exhausted by August 8, 2020. A total of $669 billion authorized and spent, a staggering amount in less than four months. And that doesn’t even consider the funds expended in the second round or PPP 2. Everybody measures success in their own ways, but if there are naysayers out there as to the success of the PPP stimulus package, one only has to assess the stock market performance through the 22 months ended January 31, 2022, which is up substantially since the beginning of the Pandemic. And that includes the approximate 9 percent downturn in January 2022.

I was one of EisnerAmper’s point people/knowledge experts assisting clients in working through the maze of applying for funds, applying for forgiveness, and working through the do’s and don’ts and other considerations since the pandemic began and funds became available. As with anything brand new, there are certainly fits and starts and frustrations along the way and this was certainly no exception. But even now looking back almost two years, keeping the context which we will outline below, the results in general were staggeringly successful.

Initial Observations

• People complained about accessing the website, the constantly changing requirements and the occasional overload and/or crashing of a Bank’s or the SBA website. Sometimes FAQs were coming out daily or twice daily. But as I said to applicants at the time, PPP was not an “add on” or variance to an existing SBA program. There were no existing processes and procedures in place. So, to go from nothing to $349 billion stimulating the economy in a month’s time or less, give or take, I thought and continue to believe was exceptional.
• Regarding the forgiveness applications, consistently throughout the process from just about every source I checked with, frustration came about with accumulating the detail to support the Forgiveness application. I had multiple spirited and yet good-natured conversations, where I said, “Where have you received or been given free money? And all you had to do to keep it was to fill out some paperwork. When does that ever happen in our lives? If you (the recipient of those funds) don’t want to provide the appropriate and required documentation, then the other alternative is to return the loan money.” This rarely happened.

Sudden Thoughts and Second Thoughts

Some additional items to ponder:

• Kudos to the payroll companies like ADP, Paychex and others – I thought the reports they created and developed in such a short period of time were exceptional. Another lifeline desperately needed. Also, the providers’ abilities to generate and integrate real time modifications – these reports saved clients tens of thousands of hours in work. Also, the fact that the reports were very consistent and easy to follow was a true blessing of what technology accomplished.
• I would have kept the requirements for filing Form 3509 and 3510 for loans over $2 million. I believe it provided the accountability that was needed and currently is now sorely lacking. Anyone who applied for loans of that magnitude should be held to a higher standard and scrutiny. If they weren’t able to support the requests, they should have had to return the money. One can see the potential need for the supplemental form by considering the number of fraudulent cases that have surfaced. Having an additional level of accountability should have been welcomed rather than disdained. Thankfully, those are a very small minority, but jail time and threatened prosecution are certainly a gating deterrent. I firmly believe that level of accountability is warranted especially in light of the ability of what full forgiveness meant and still means.
• Again, kudos to the number of professional services firms that served as thought leaders and resources as well as to the Small Business Administration (SBA). While the volume at times one would easily consider to be overwhelming, it provided and even now continues to prove to be an exceptional resource. Furthermore, now that most companies are in their second round of Forgiveness applications, the SBA continues to serve as a great resource. If you need help finding the right person or department, I would be happy to help.

What Does this Mean for 2022?

Pardon the cliché, but yes, all good things must come to an end. Now the stimulus – both for companies and individuals – has come to an end. Now the entities must survive on their own. One comment that holds true, for the most part, is that once you have seen the abyss, you never want to be a part of it again. Our job is to provide our clients a second chance and hope they have laid the foundation and are smart enough and have the vision to take advantage of it. For the most part the government has served as the capital and equity provider. Paraphrasing legendary investor Warren Buffet – Only when the tide goes out do you see who has shorts on.

On a multitude of levels, lets hope the capital infusion was not waisted, or said more positively, that it provides the runway and foundation for the future.