Small business owners in high-rent cities like New York, Los Angeles and Chicago are finding the federal government’s $660 billion Paycheck Protection Program won’t pay the bills.
Because just 25% of a loan award can go toward rent, mortgage interest and utility payments, some restaurant and shop owners in metro cities have decided not to apply, according to the Wall Street Journal. In order for the PPP loan to be forgiven, 75 percent of the money must go to paying employees. Businesses that accept the funds also must rehire employees they have laid off.
Small businesses in less-populated regions — where rents are lower — have received a disproportionately-large chunk of the funding, according to the Journal.
Around 55 percent of small businesses in New York state have been forced to close but only 14 percent had secured PPP funding by mid-April, the report noted. By comparison, in North Dakota, just 20 percent of small businesses have shuttered but 44 percent have received loans.
Advocacy groups like the Small Business & Entrepreneurship Council have been pushing the federal government to ease restrictions on how companies choose to hand out the money.
“At the end of the day, employees need an actual business to return to if they want to collect a paycheck,” said CEO Karen Kerrigan. “There needs to be more flexibility provided in the rules.”