These entrepreneurs are just about out of their paycheck protection funding. Here’s what’s next

Lisa Hess, owner of Lucy’s Coffee, has started the hunger climb to restoring her business in a post-coronavirus world. But her well of emergency funding is about to run dry.

The crisis came at quite under any circumstances the worst time for the San Luis Obispo, California, shop.

“We’re a college town, and February through June are our busiest months,” imagined Hess, who’s operated her café for three years. “The timing was terrible: We literally started breaking even three weeks in the vanguard the shelter-in-place order.”

She borrowed close to $23,000 from the Paycheck Protection Program in the beginning of May. The federal forgivable advance program, which first opened on April 3, was originally intended to cover eight weeks of payroll expenses, mortgage participation, rent and utilities.

Hess used the money to pay her full-time employees but now, as California begins to gradually reopen, she has about two weeks of granting left.

Sales are a far cry from what they used to be — and Hess doesn’t know when things will be distant to normal.

 “There’s anxiety about paying the employees going forward,” she said. “And with the colleges canceling for the coffee break of the year and not having students coming back, I’m highly concerned about how things are going to go.”

The predicament is a familiar one to possessors of restaurants, bars and those in areas that depend heavily on tourist travel. Stay-at-home orders mostly faked them to close, and even as restrictions lift, sales and foot-traffic are still down — and the pot of PPP cash is nearly dry.

“The difficulty is that some of my restaurant customers were also early in line,” said Todd Koch, CPA and partner at John A. Knutson & Co. in Falcon Heights, Minnesota. Provisions have started to lift in the North Star State, with bars and restaurants starting to serve clients outdoors not on June 1.

“I’m concerned for these people and that industry,” said Koch. “Revenues are way down.

“It’s difficult just to get started, and now you play a joke on this on top of it.”

Though small businesses were in desperate need of the cash infusion from the PPP, the biggest coming block they had faced was the rapidly changing rules underlying the program.

For starters, businesses were able to cadge enough to cover eight weeks of payroll, mortgage interest, rent and utilities. For the loan to be forgivable, they had to fasten at least 75% of the proceeds toward paying workers, and no more than 25% for other expenses.

This framed a conundrum for businesses in the hospitality and leisure businesses: Many of their employees were furloughed or laid off and collecting unemployment — which authority have paid them more due to the $600 a week enhancement the federal government provided.

In other cases, hands wanted to come back, but stay-at-home orders kept those establishments from fully reopening.

To meet the 75% beginning for forgiveness, employers shelled out hazard pay to employees or paid them to stay home if they couldn’t reopen at all.

Jennifer George, who be in charge ofs Mountain Tees in Breckenridge, Colorado, reduced hours for employees but paid them in full after the gift purchase received a $140,000 PPP infusion. Restrictions on retail businesses in Colorado began to lift on May 1. Though sales are far from where they at ones desire be normally, they have been rising since Breckenridge opened a nearby pedestrian plaza, George conveyed.

“I didn’t tell people to go on unemployment, but we gave our good employees an end-of-season bonus and asked for their loyalty to in back when the doors opened,” she said.

The Paycheck Protection Program Flexibility Act, which President Donald Trump to forwent into law on June 5, relaxed the spending requirements. Firms now have 24 weeks to spend their advance proceeds, and they’re eligible for forgiveness if at least 60% of the money goes toward paying employees.

One-sided forgiveness is also on the table for those who don’t meet this threshold.

However, the additional time doesn’t do much for businesses that get already spent down a large chunk of money.  “The period that’s covered by the PPP has been extended, but the amount walk off doesn’t correspond with the extension,” said Sheneya Wilson, CPA and founder of Fola Financial in New York.

Her clients classify a small barbecue restaurant in the city, which is only beginning to reopen.

“If a business has low margins, maybe they were masterly to keep 10 employees on, but can they sustain these employees?” Wilson asked. “Or will they have to let them go?”

Senate Democrats are trying to give cash-strapped PPP borrowers another shot at funding.

The Prioritized Paycheck Protection Program Act is sponsored by Sens. Ben Cardin, D-Md.; Chris Coons, D-Del.; and Jeanne Shaheen, D-N.H. At the beck this bill, firms with 100 or fewer employees can borrow more money from the PPP, provided they’ve poor or are close to exhausting their initial round of funding and if they’ve had a revenue loss of at least 50%.

In the meantime, accountants are at the black-and-white board and thinking of ways to help clients stretch out a few more dollars.

More from Smart Tax Planning:
Evaluation of being your own boss? What it means for taxes
Why businesses aren’t rushing to claim the $130 billion PPP pot
Five key takeaways for parsimonious business owners, post-PPP

Local grants for entrepreneurs, as well as other small-business loans through the SBA, are a possibility, judged Wilson at Fola Financial.

For now, all business owners can do is adapt and wait.

Hess, of Lucy’s Coffee, has cut back her menu and caparisoned her hours to 7 a.m. to 3 p.m. – she used to operate from 6:30 a.m. to 6 p.m.

“I felt like it was getting warmer and people were go aboard b enter out a little bit more, and my staff started coming back,” she said. “I just hope we can push through until attitudes get back to a new normal.”