Since the pandemic began, local economies and neighborhoods have seen devastating challenges as businesses struggle to remain open or adjust to this new environment. The hospitality industry took the worst hit, with the number of open businesses decreased to 54.6% and a 64% decrease in revenue for small businesses in the industry. In Boston Chinatown, Relationship Manager at Citizens Bank, Herb Wong said, “I know a lot of business owners, they are struggling. They asked me, ‘Hey should we close this restaurant?’ They’re one of the larger restaurants in Chinatown.” 

The CARES (Coronavirus Aid, Relief and Economic Security) Act was first enacted by the federal government in the spring of 2020 to provide economic relief. It included support for small businesses through the Paycheck Protection Program (PPP) implemented by the Small Business Administration (SBA).

Previously, Sampan reported on the PPP in relation to the second stimulus bill as a whole. We learned how Kwong Kow Chinese School was able to stay afloat. In light of the “Second Draw” of PPP loans available as of January 13, Sampan sought to further understand the program and how it differs from its predecessor. 

“It is technically a loan from the SBA,” said Spencer Klein, CFO of the Asian American Civic Association. The application and the money is processed by the banks. Although it is a loan, a portion of it can be ‘forgiven’ and does not need to be repaid if it falls under certain categories of spending. “Specifically, it’s used for salaries, and employee benefits, and then also some operating costs specifically around rent, or mortgage fees. […] Within the proper time period, [a portion of] the amount of money that you borrowed will be forgiven, and the rest turns into a loan that you’ll have to pay back to the SBA,” said Klein. 

The amount of money that has to be paid back, however, can be done so with very low interest rates. CPA Richard SooHoo said, “even though you have to pay it back, you don’t have to pay any taxes on it.” Loans do not get taxed but do include an interest rate. Specifically for the PPP loans, SooHoo said “They start off as loans. And you have to pay it off with a certain interest rate [over a period of time]. The interest rate on the PPP loan is 1%.” 

Nonprofit organizations are eligible for PPP loans as well. Senior Vice President at Eastern Bank, Yongmei Chen said, “The CARES Act specifies how nonprofit organizations may qualify for a PPP loan, which has opened up important opportunities for the nonprofit community.” AACA is one such organization that was able to successfully apply for the PPP. However, Klein notes that “If a person is being paid for, by a federally funded program, then you shouldn’t be using PPP money to pay for their salary at all.” Hence, the calculations for nonprofits applying for the PPP must be careful. If the nonprofit’s operations are covered by government grants, then they do not qualify for PPP loans. (And instead, if you apply for those then it becomes part of the loan that you need to pay back.) 

When the PPP funds first became available, banks did what they could to help process as many loans as possible within the time frame set by the SBA. Vice President Abby Nguyen-Burke said, “When the first day of PPP funding opened last year, like now both businesses and banks alike were faced with applying the SBA’s guidelines even while they were continually changing and being updated.” Despite their efforts, the money ran out in two weeks. Klein said, “A lot of big corporations snapped up PPP money right away, yes, they were able to do it.” 

To avoid the same problem from happening, the SBA and federal government established further guidelines and policies for applicants of the loan. Whereas the loan program was unavailable for those self-employed, it now is. The worst-hit hospitality businesses also now qualify for more funds. Owner of Douzo Japanese Restaurant, Jack Huang said “The second PPP, for restaurants it is 3.5 times your average monthly salary payroll [compared to the 2.5 times from the first round of PPP].” This has significantly helped Huang’s business in supporting his employees during this time.

Referring to spending the money towards employee salaries and benefits, this is important for the ‘forgiveness’ section, which businesses must apply for later on. Klein explained that “whenever you use your money up, you have a 10-month time frame to apply for forgiveness, and they determine whether or not you qualify for forgiveness depending on where you had spent the money.”

“No matter what loan an organization qualifies for, it’s important for business owners to familiarize themselves with the documentation that’s required and to prepare in advance,” said Nguyen-Burke. “For example, a significant piece applicable to some components of PPP is understanding how to calculate eligible payroll expenses including health and retirement benefits. We encourage businesses to reach out to their banker or lending institution and to research information through the SBA to confirm the requirements.”

For minority business owners, and those worried about the language barrier, both Eastern and Citizens bank have partnered with local nonprofits in order to better service the community. Wong from Citizens Bank said, “[For some,] it’s the language. English is their second language so they’re discouraged and in applying for the PPP because they don’t understand it.” Wong has partnered with Gilbert Ho from Chinatown Main Street to better service the community. 

Nguyen-Burke said, “We recognize that language barriers can be a challenge for some businesses as they seek to understand and apply for PPP. It is why we have taken several steps to be of help. We have partnered with nonprofit support organizations, including AceNextGen in the Asian community and the Hispanic Chamber of Commerce in the Latino community, and have designated bankers who are available to assist members of these organizations.” One can also access their services online or simply inquire about it at Eastern Bank. 

Despite the PPP loans, small businesses are still struggling. Wong said, “Even though the PPP is helping maintain their employees and helping pay for their paychecks, rent is expensive in Boston. So I think that’s where they’re struggling too.”

To read this article in Chinese (Traditional), please click here.