I am not commenting on whether or not they should have been. I am not interested in tying them back to discussion of any other loans or loan forgiveness.
Why call them loans if they are not?
In: Economics
They loaned out our tax money to help payroll. People caught on quick that they could make a minimal effort to payback and fraudulently use the money for other things.
I had a coworker, a nurse, that did exactly that. Small amount- like 40k. But still.
Loans aren’t taxed.
> A forgiven PPP loan is tax-exempt, meaning it does not cause you to recognize a taxable gain or income. The IRS has clarified that expenses paid for using forgiven PPP loan proceeds are still deductible as well.
It was a handout to rich people.
Our company got a PPP loan. I was the person responsible for all the paperwork.
The reason they were called loans is because that’s what they were. When we applied, we didn’t even know what the final forgiveness criteria would be. We just knew there would be an opportunity for forgiveness. Also keep in mind that most people who applied weren’t yet experiencing the impacts of the pandemic. The first round of the program rolled out before things got really bad.
So you applied for this loan, and you knew the loan would have a forgiveness program, but you didn’t know the specifics.
Fast forward a bit, and the government rolled out the forgiveness criterial. The forgiveness option we used was based around payroll. If we maintained our payroll levels during the pandemic, we could get forgiveness. If you didn’t, we couldn’t. There were other options for seeking forgiveness, but I don’t recall the specific details.
Here’s the important part though: if you did nothing, you didn’t get forgiveness by default. You’d have to pay the money back. That’s why they were loans, and not simply stimulus money.
In order to be forgiven, they had to meet certain requirements, such as making sure they were used to cover payroll. Now the government could have instead retroactively reimbursed businesses for approved expenses. However that would have delayed getting the money out, and many businesses would have gone bankrupt waiting for the check.
Because you were expected to pay them back, *unless* you met certain criteria. And those criteria were pretty easy to meet.
But it’s just semantically easier to say it’s a loan that can be forgiven than a handout that can be clawed back.
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They reverted to loans if a business didn’t keep to the terms.
A friend of mine has a restaurant. When COVID hit they were closed for an extended amount of time.
His choices were to fire everyone and hope whenever he could open back up, he could get staff to return….or he could take the PPP loan.
As long as a certain percentage of staff were kept and not fired, the loan would be forgiven.
It benefitted the government because had businesses fired all their staff, unemployment and Medicaid would have been overwhelmed. Also, those not fired employees were still paying taxes and jobs they could easily go back to.
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Imagine you have a big box of cookies. Now, sometimes, if someone doesn’t have enough cookies to eat, they might feel sad or worried. So, the government wanted to help businesses so they could keep running during a tough time, like when lots of people couldn’t go to work because of a sickness called COVID-19.
So, the government said, “Hey, we’ll give you some extra cookies to help you keep your business going. But, you need to promise that you’ll try your best to keep your workers paid and your business running smoothly.” They called this help a “PPP loan.”
Now, usually, when you borrow something, like if you borrow a toy from a friend, you have to give it back, right? But in this case, the government said, “You know what? If you use these cookies to help your business and keep your workers paid, you don’t have to give them back! It’s like we’re giving them to you for free!”
So, even though they called it a “loan,” it was more like a helpful gift to keep businesses going strong during a tricky time. That’s why some people might call them “PPP handouts” instead of loans, because businesses didn’t have to pay them back if they followed the rules.
If the government says “We’ll give you a pile of money, and we want you to spend it on paying your employees” then they have to watch to see if you actually do that, and if you don’t, they’d have to sue you and prove that you didn’t in order to make you pay it back.
Instead, if they say “We’ll *loan* you a pile of money, and if you can prove that you used it to pay your employees, you won’t have to pay it back” then it’s up to you to prove you did use it that way, and if you don’t, then you need to pay it back.
Either way it’s free money, but the second way puts the burden of proof on you, which is easier for the government.
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