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Small businesses in Massachusetts have been too scared to spend federal loan money

Imagine getting a forgivable loan from the federal government to rescue your small business during a pandemic — and then being too scared to spend it.

That has been the predicament of restaurateurs and other small business owners in Massachusetts who have been unable to fully open their doors because the state is one of the last in the country to reopen its economy.

Some relief may be on the way after the US House and Senate passed crucial fixes to the Small Business Administration’s Paycheck Protection Program. The legislation now awaits President Trump’s signature. Under the measure, the PPP loan period will be extended to Dec. 31 and give recipients 24 weeks instead of eight to spend the money.


The original law called for at least 75 percent of the loan money to go toward payroll in order to be forgivable, but now businesses can use up to 40 percent of the loans on non-payroll expenses, such as rent and utilities, and still be forgivable. Companies and sole proprietors also have five years instead of just two to pay back the loans.

“It almost makes it like a grant,” said Jeffrey Levine, a partner at Newton accounting firm Alkon & Levine.

Levine said about half of his firm’s 250 small business clients applied for PPP loans and about 90 of them got approval. Still, clients were worried about how much of the loan they might have to pay back.

The current legislation gives more businesses peace of mind that the money won’t turn into a big loan ― albeit with a modest 1 percent interest rate.

“It unchains them and gives them much more flexibility,” Levine said.

The PPP has been the federal government’s signature program to help small businesses that were forced to shutdown to reduce the spread of COVID-19. It’s a $659 billion program that came with good intentions: Give free money to employers if they can keep workers on their payroll or rehire those who were laid off.


The program, administered through banks, got off to a rocky start in April, confusing both banks and loan applicants. Then the money ran out in two weeks, forcing Congress to quickly authorize more funding. According to the SBA, about 4.5 million loans have been approved totaling about $510 billion. The average loan size has been about $113,000.

Unless PPP rules changed, local restaurants that were lucky enough to get money in the first round haven’t been feeling so fortunate. Legal Sea Foods, for example, shuttered 32 locations and furloughed most of its 3,100 employees, but the company so far only has spent about 20 percent of its loan, unsure when it might open again for dine-in service and rehire employees.

Legal CEO Roger Berkowitz called the original PPP terms “onerous,” but says the current Congressional changes provide “much needed breathing room.”

Legal will need it. Even though the state might give the green light for restaurants to offer outdoor dining next week, Legal probably won’t open for sit-down service until July because Berkowitz wants to make sure the virus is truly under control.

“I’m skeptical that the numbers are going down,” he said. “I’m waiting on the side of caution. To open and not getting anywhere near the occupancy doesn’t make a lot of sense.”


Curt Carpenter, principal of Lekker Home in Boston, has also been reluctant to spend his PPP money ― only about 30 percent so far. Last week, more retailers in Massachusetts were allowed to open for curbside pickup, and he has brought back three employees using his PPP loan. During the shutdown, Carpenter had to temporarily lay off half his staff, or six people, at his modern-furniture and home decor store in the South End.

Carpenter anticipates he won’t open his showroom until the end of June. He also expects it will be awhile before revenue and staffing return to pre-pandemic levels.

“It would be foolish for a retailer to think they are going to see pre-pandemic sales even within a month or two or three months of opening,” said Carpenter. “ I am prepared for a long journey back to where we were from Q1.”

The federal government needed to amend the PPP terms because it underestimated the fallout of a virus-induced shutdown. Instead of a two-month blip, the economy may take years to recover because consumers still aren’t comfortable venturing out. Perhaps a vaccine can bring back a sense of normalcy but that probably won’t be available for at least another year.

Changing the PPP will increase the chances of mom and pop businesses surviving a pandemic — and now comes the hard part: waiting to see if enough was done.

Shirley Leung is a Business columnist. She can be reached at shirley.leung@globe.com.