The Paycheck Protection Program: An introduction, by Michael R. Strain

Key Points

• The Paycheck Protection Program (PPP), established as part of the CARES Act, offers “forgivable loans” (essentially, government grants) to small businesses with the goal of helping these businesses avoid closure and avoid laying off their workers.
• Borrowers are eligible for loan forgiveness equal to the amount spent on payroll costs, mortgage interest, rent, and utilities for an eight-week period beginning with the origination of the loan, provided they do not lay off workers or make large reductions in their pay. Business that have already laid off workers due to concerns about the coronavirus can rehire them and receive loan forgiveness.
• The program relies on banks to issue these loans. Banks are authorized to charge interest and generous processing fees and are shielded from enforcement activities and penalties by the government related to loan forgiveness for eligible uses. The government pays the fees, not the borrowers.
• The Treasury Department will have PPP operational on April 3 for small businesses and sole proprietorships.
• To make the program as effective as possible, the government should (1) assure banks that the law’s “hold harmless” provisions will be strictly interpreted and enforced, (2) communicate that more money will be provided for the program if needed, (3) help PPP lenders issue a large amount of loans quickly, and (4) engage in an active program of public messaging to encourage both lenders and small businesses to..........
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