As billions of dollars in federal relief come flooding to Maine small businesses through an emergency loan program, there are increasing calls to modify the program and give employers flexibility to use the money to greater effect.

Lawmakers and small business advocates also are pushing for bigger programs to stabilize local economies as catastrophic business conditions triggered by the coronavirus pandemic show few signs of abating.

Maine businesses had received more than 24,000 forgivable loans worth almost $2.3 billion from the federal Paycheck Protection Program as of May 1, according to the U.S. Small Business Administration. The funding is meant for small employers to pay employees and cover basic expenses for two months.

The loans have been a godsend for many businesses, but others say there are flaws in the program that prevent many businesses from taking advantage. Strict rules for how the money can be used and an eight-week deadline for rehiring all workers are among the most criticized elements.

As the pandemic hit Maine, Joe Capozza laid off 20 percent of the 54 employees at his three Portland flooring companies and predicted the situation would worsen even further.

His emergency loan allowed him to keep everyone else paid and rehire about half the workers he lost.

“That is the most important thing about it, to be able to keep people getting a paycheck,” Capozza said. “There has been a big morale boost in the company.”

The funding also gave the company breathing room to develop procedures to keep working safely with social distancing measures and prepare for an uncertain future, he said.

“I don’t think anyone knows what it’s going to be like on the other side of this, but it helps us prepare for it,” Capozza said.

The Portland Press Herald and other newspapers owned by entrepreneur Reade Brower in Maine are among the businesses that have received loans through the Paycheck Protection Program.

“It is really enabling us to continue our operations while our advertising revenues decline significantly,” said Lisa DeSisto, publisher and CEO of the Press Herald.

Peter Hein was nearing layoffs at Ron Brown Plumbing and Heating in Cumberland when he received a paycheck protection loan. Business dried up in March, when customers decided allowing workers into their homes wasn’t safe.

“What I just really appreciated is that it created a certain level of certainty for us to keep our people employed,” Hein said. Customers are slowly coming back – he’s at about 50 percent of the volume he had more than a month ago.

Hein is using the loan to gear up for whatever comes next, including a possible second wave of infection this autumn.

“I don’t know what the summer brings; I have to operate week to week,” Hein said. “We might be living in a different world come fall.”

Krista Kern Desjarlais, owner of the Purple House bakery in North Yarmouth, has not applied for help from the Paycheck Protection Program because she doesn’t think it will fit her business. Shawn Patrick Ouellette/Staff Photographer

That uncertainty has led some businesses, particularly in southern Maine’s sprawling restaurant industry, to call out what they see as shortfalls in the program.

Three-quarters of each loan is supposed to be used to cover payroll, and 25 percent to cover basic expenses such as rent and utilities. Each loan is forgivable if the recipient follows certain guidelines. Any amount that is not forgiven must be repaid within two years at 1 percent interest.

Those restrictions convinced Krista Kern Desjarlais that the loan would not work for her business, the Purple House bakery in North Yarmouth. With coronavirus still circulating, no revenue and no idea when the situation will improve, Kern didn’t want to take a loan with confusing forgiveness standards.

Some Maine business owners have said one of their biggest fears about using the loan program is that if they fail to meet the standards for loan forgiveness, they will still be stuck in a recession and saddled with extra debt they can’t repay.

People are unlikely pack into restaurants soon, and Kern worried she would have to lay off her employees again when the money ran out. She’s not prepared to reopen her bakery and doesn’t know how she’ll run her summertime ice cream and takeout stand.

“I think this plan was put together in good faith to help small businesses, and there are plenty of small businesses that can use it and use it well,” she said. “Restaurants are just not put together in a way that makes this feasible at a time when people are afraid to go out to eat.”

Some restaurants and other businesses worry they won’t be able to meet program requirements because they are unable to pay employees laid off over a month ago more than they currently make from enhanced weekly unemployment benefits.

According to the U.S. Treasury Department, if businesses can prove they made a job offer to a laid-off employee that was declined, it will not affect their loan forgiveness. Workers temporarily out of a job because of the pandemic also may become ineligible for further unemployment benefits if they decline an offer to return to work.

Sen. Susan Collins, R-Maine, one of the architects of the Paycheck Protection Program, said the amount of money disbursed in such a short period of time shows it is a success.

“I can’t think of another program ever that has been more beneficial to Maine’s small businesses and their employees that has been implemented in the midst of a crisis and has been as helpful as this one,” she said.

When the program was drafted in March, an economic shutdown lasting this long was unforeseen, Collins said.

“We had no idea that business were going to remain closed for as long as they appear they are in the state of Maine,” she said.

Looking back, it would have been helpful to have the loans cover a longer period of time than eight weeks, or allow a business to start its eight-week use at a later date, she said. Moving forward, there are discussions about next steps including more forgivable or low-interest loans to help prepare businesses such as restaurants to reopen.

“We’re talking about all sorts of different ideas about what comes next,” Collins said.

Lawmakers and trade associations are pressing Congress to amend the program to give greater flexibility to businesses.

In a letter to Maine’s congressional delegation, state Sen. Rebecca Millett, D-Cape Elizabeth, Democratic House and Senate leadership, and about 60 other mostly Democratic state lawmakers asked for program reforms.

They said the eight-week measuring period to start spending the money should be extended or deferred until businesses can meaningfully operate again, such as when restrictions are lifted under Gov. Janet Mills’ plan to restart the economy. They also asked to allow companies to use more than 25 percent of the loan for non-payroll expenses.

In a letter to Congressional leaders, Rep. Jared Golden, D-Maine, asked to allow more of the money to be used for purposes other than payroll, and to extend the loan-repayment period beyond 24 months and provide further clarity on forgiveness terms.

Golden included issues raised by businesses in the 2nd District including a resort, brewery, restaurant, hotel, dentist’s office and developmental disability nonprofit.

While there are cases in which businesses have substantially benefited, “some of the rules of the program do not reflect the long-term realities many businesses and workers continue to face in Maine: extended state-ordered closures, anemic consumer spending, and almost no money coming in from out-of-state tourism as we enter Maine’s summer months,” Golden said.

The American Institute of CPAs, in recommendations to improve the loan program, also called for allowing businesses to begin using the eight weeks of funding when restrictions are lifted instead of when loan proceeds are received “so small businesses have adequate funds to ramp up operations.”

House Democrats are drafting another relief package that would extend the plan for months and implement some of the changes asked for by businesses, said Rep. Chellie Pingree, D-Maine.

It may also include a program to cover salaries and business expenses and give local companies the means to ride out the pandemic, she said. Some European countries have provided funding to cover most employee wages and business expenses to limit unemployment.

“One of the arguments is why not just pay payrolls instead of making people jump through hoops?” Pingree said. “I don’t see this economy recovering very soon, even if states begin to open up.”

Whether such sweeping proposals are realistic remains to be seen.

“I never thought in my lifetime we would be plunging this much money into the economy,” Pingree said. “I wouldn’t dismiss anything as a next step.”

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