image shows the president's hands and a signed bill
President Donald Trump signed the CARES Act March 27.

Loan program urgently needs fixes, HFA tells leaders

The Home Furnishings Association is asking leaders in Washington to implement the Paycheck Protection Program lending initiative as Congress intended.

While Congress wrote the $2.2 trillion CARES Act, an emergency economic relief bill signed into law by President Donald Trump on March 27, implementation was assigned to the U.S. Department of the Treasury and the Small Business Administration. Their decisions don’t match what Congress intended in three ways:

  • Loan forgiveness is pegged to an unrealistic timetable.
  • Businesses are allowed too little leeway in how they use the funds.
  • And the loan repayment schedule is too short.

HFA’s Government Relations Action Committee raised these problems in a conference call April 8 with Eleni Valanos, a professional staff member for the U.S. Senate Committee on Small Business and Entrepreneurship.

Stores can’t use the funds when they’re closed

Howard Haimsohn, president and CEO of HFA member Lawrance Furniture in San Diego, explained the flaw in the program’s timeframe. Borrowers won’t be required to repay qualified expenses incurred during an eight-week period that begins when they receive the loan. But Haimsohn expects that public health orders will keep his business closed at least into May and possibly until June – well into the eight-weeks if he receives loan funds soon.

“This program won’t work for me,” he said. “It won’t benefit our company and it really won’t benefit our employees because it won’t strengthen our business. Whenever we come back, we’re going to be floundering because we won’t have access to most or all of the forgiveness of the loan. I think that’s what the intent was, to help employees and to help businesses. And we will not get any help if we are in a shutdown condition for most of the time that we have to define as our eight-week period. I don’t want to start my eight-week period until I can bring people back and start rebuilding my business, which is going to take many months.”

Valanos agreed that is a valid concern and indicated that Congress meant to allow more flexibility in the loan program.

Senate staffer understands HFA concerns

“It was more of our intent that the borrower would have been able to choose what eight-week period they could go for, because a lot of these businesses are closed for this period and it doesn’t make sense for them to start now.” she said. “It may be more beneficial for their employees to be getting unemployment during this time.”

Valanos said she understood the other concerns, too – that borrowers must apply 75 percent of loan funds to payroll to earn forgiveness and that funds not forgiven must be repaid in two years rather than 10 years as allowed in the CARES Act.

“I’m hoping we can get to a fourth (legislative) package where we can fix a lot of these problems and maybe come up with other solutions,” she said.

Association points out problems to lawmakers

HFA sent letters to a number of key figures in Washington, including Sens. Marco Rubio and Ben Cardin, chairman and ranking member, respectively, of the Senate small business committee; leaders of the House small business committee; the secretary of the treasury; and the head of the Small Business Administration. The letters request:

  • Greater flexibility to determine the time when loan forgiveness is calculated. Currently, only expenses incurred during the eight weeks after the loan is received count toward the amount forgiven. Most businesses applied right away for fear the program might run out of funds. Once applications are approved, the loan must fund within 10 days and then the eight-week period must begin. Many retail furniture stores are under mandated shutdowns. Many expect they will not be allowed to reopen until May or even June. Calculating the portion of their loan that can be forgiven based on expenses during an eight-week period when they are likely to be closed does not help them. Many of our members will rebuild their businesses over a longer period. They won’t be able to resume normal operations quickly. They would like the opportunity to choose when to start the clock based on when it makes sense to bring back more workers, welcome more customers into stores and deliver more products. More flexibility and an extended loan period would help make sure they can most effectively utilize the resources available. This could be tied to a date when a business is able to reopen rather than starting the eight-week period while the business is shuttered, with no definite opening date.
  • Greater flexibility in spending the money. Our members have significant other fixed expenses beyond payroll. These include mortgage interest or rent/lease costs and utilities. To put a 25 percent cap on loan forgiveness for those expenses will limit the beneficial impact of the loan. We believe our members should be able to apply the funds to areas that are most urgently needed for their businesses to survive this crisis. Only businesses that survive ultimately will be able to return to full employment. This cap was not included in the CARES Act but is rather a product of SBA/Treasury guidance.
  • A longer term for repayment. For parts of the loan that cannot be forgiven, the repayment term of two years will pose a severe hardship as many businesses will only gradually regain viability. We believe a term of 10 years would be more realistic.

Contact your senators and representatives

HFA’s Government Relations Action Committee also wants to see more funding and better administration in the SBA lending programs. In addition, it has identified other needs that must be addressed in the next relief bill. For now, it is asking all HFA members to contact their senators and representatives to ask for the changes listed above.

[Contact your elected officials]

Our industry needs more help, but assistance programs must target funds in ways that achieve the most benefit for businesses and employees.

[HFA COVID-19 recovery page]

[Retailers get tax help in CARES Act]

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