The Paycheck Protection Program has been a life preserver for some business owners, but waters for the program’s launch have not been smooth.

Paycheck Protection Program - What just happened?


Phillip R. McCollum, Jr., CPA, JD, and Christina Henning, CPA

Thanks to coronavirus lockdowns, the economy may have ground to a halt, but efforts to prop up affected businesses and individuals have been coming at us fast and furious. The CARES Act and its Paycheck Protection Program have been a life preserver for some business owners. But the waters for the program’s launch have not been smooth.

In mid-March, Congress began discussions on various proposals to protect the economy during pandemic shutdowns. Senate majority leader Mitch McConnell proposed a stimulus package that included funds for the Paycheck Protection Program. The CARES Act was signed into law on March 27, 2020.

Don’t miss: SBA clarifies good-faith certification review

PPP Round 1 began disbursing $349 billion in funding on April 3, 2020 but ran out of money within days. Problems with the program quickly became apparent. The program was touted as a lifesaver for small businesses, but major corporations and high-profile companies were clearly enjoying outsized benefits.

Large companies with banking connections rushed to take advantage of the funding even though they didn’t need the assistance, using it instead to grow their business. Chembio Diagnostics, a developer of rapid medical testing, received $3M and admitted this helped them grow, not just survive. Among other major businesses taking advantage of the loans, the multi-million-dollar hamburger restaurant chain Shake Shack received a $10M loan, and the Los Angeles Lakers basketball team received a $4.6M loan. They have since returned the funding.

The outrage was swift and deafening, leading Congress to approve $320 billion in additional funding on April 24, 2020. PPP Round 2 began disbursing on April 27, 2020. This time around, the Small Business Bureau was clearer on guidance.

The trouble with the program was its initial launch before clear rules and guidance were created, and its reliance on self-certification. U.S. Treasury Secretary Steven Mnuchin attempted to remedy that on April 28, 2020 when he announced loans over $2 million would be reviewed.

Another problem was businesses and self-employed individuals initially applied for loans before guidance on the maximum loan amount came out. After guidance was clarified, they were now in a position to an increase in their loan with very little time to analyze and request the increase.

Don’t miss: PPP loan forgiveness application now available

On May 13, 2020, the SBA released guidance that clarified businesses with loans of $2 million or less are assumed to have been made in good faith. Small business gave a huge sigh of relief. But one big question remained. How will these loans be forgiven?

On May 15, 2020 the long-awaited guidance and application for PPP loan forgiveness was released. Here is a list of FAQs from the SBA and the US Treasury department. Also on May 15, the HEROES Act, a second stimulus bill, passed the U.S. House of Representatives.

The second PPP wave was much smoother than the first, but the program has been a magnet for scammers. A Texas man was recently charged with seeking $5 million in loans for 400 fake employees. In April, the FTC filed a case against Ponte Investments, LLC for claiming to offer fraudulent PPP loans. According to the complaint, Ponte Investments, LLC used websites ( promoting a fake SBA Loan Program.

Don’t miss: Interim final rule for PPP loan forgiveness

Also, early data suggests loans are not being evenly distributed throughout the country. Some states are seeing greater numbers than others, with California and Texas leading the pack. What exactly that means remains unclear.

On May 22, 2020 the SBA releases PPP loan forgiveness interim final rule.

To date, banks have made about 4.3 million PPP loans totaling over $500 billion. As of May 30, 2020, the program still has $140 billion in funding left. Though rocky in the beginning, and limited in scope (some small businesses are saying the program doesn’t allow enough flexibility in how the funds are spent to be of much help), the program has proven exceedingly popular, and now banks are bracing for a tsunami of loan forgiveness applications.

For more information and resources on COVID-19, see our coronavirus page. Feel free to contact your Henry+Horne tax adviser with any questions.

Phillip R. McCollum, Jr., CPA, JD, Partner, specializes in tax planning, consulting and compliance work for privately held businesses and their owners. He can be reached at (480) 839-4900 or

Christina Henning, CPA, Manager, specializes in tax compliance and consulting for businesses and individuals. She can be reached at (480) 839-4900 or