Vijay Sundaram of Zoho Discusses PPP Funding for Small Business

Federal Funds

On the Small Business Radio Show this week, I talked with Vijay Sundaram who is Chief Strategy Officer at Zoho about the next round of PPP funding for small business. We also discussed how the program can better serve small companies and what else the federal government could do to help.

Congress approved another $310 billion of funding for the Paycheck Protection Program (PPP). And there’s another $60 billion for Economic Injury Protection Plan (EIDL).

Of the new funding, $60 billion is reserved for lending to small and medium sized financial institutions.

But this roll out of getting much needed money through banks has not gone smoothly and it has left a lot of small business not being able to get help while publicly traded companies received $500 million in the first round.

It has been reported many companies not badly affected by the coronavirus pandemic were able to receive a forgivable loan since it was not based on need, sales or income; but instead on how many employees a company had at a particular location.

It is projected that in the first two rounds probably less than 15% of the small businesses in the U.S. will receive a loan.

Vijay Sundaram of Zoho Talks PPP Funding for Small Business

Small businesses that did receive a PPP loan must now use 75% of the funds for payroll for the next eight weeks or June 30, 2020 (whichever comes first). Unfortunately, this effectively makes companies unemployment agencies funneling money to employees even if the small businesses are not ready to hire them back.

He is responsible for the partner and channel program, in addition to global growth and marketing. Vjay is a prior entrepreneur and company founder, in cloud supply chain software, mobile advertising technology, and renewable energy.

He emphasized that if we are going to help the economy, we need to provide a lot of assistance to the 30 million small businesses in the U.S. which are a large part of the GDP and provide 47% of this country’s employment.

He praised the federal government for the speed they passed the program, but he believes that banks were not an optimal channel since they are set up with barriers to give loans and to lessen their risk.

Vjay comments that they probably “handed out in 14 days what they typically hand out in 14 years!”

He recommends the government find a better channel to distribute the money since banks naturally focused on bigger clients with whom they had a relationship.

In addition, many small businesses were not even aware of all the programs that could assist them.

He believes that the SBA needs to help small businesses with all three problems they face:

How to keep employees,
How to retain cash flow
How to prevent insolvency

If this happens, Vjay explains, “businesses can then focus on what they need to do operationally to keep their business alive and spend time on re-imagining their business instead of keeping your creditors at bay.”

There are political barriers to getting funds directly to employees like other countries have (paying 75% of their salary directly to them) since besides unemployment, there are few mechanisms in place.

But Vjay insists that these are extraordinary times and parts of the U.S. government are doing revolutionary things.

For example, the Federal Reserve is buying corporate bonds and backstopping mortgages securities. These are exceptions have been created through the law to allow them to participate in markets where they were previously prohibited.

Vjay says we need to use innovative thinking like in Sweden, where they refunded companies’ taxes. He suggests taking steps in the U.S. like suspending payroll taxes, rent, and mortgage obligations or getting more money directly for employees like what was done in the FFCRA Act for extended sick leave.

Vijay acknowledges that there will be some fraud, but broad brush strokes to help solve the problem is what is needed urgently.

Listen to the entire episode of the Small Business Radio Show.

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