Woman in a safety mask looking at clothes in a shop. New post covid-19 normality

The $1.9 trillion stimulus package that President Joe Biden signed into law this month has been heralded by the retail industry, which has also flagged its support for Paycheck Protection Program loans for smaller companies. 

The latest round of stimulus, billed the American Rescue Plan, follows the $2.3 trillion CARES Act in March last year, and the $900 billion COVID-19 relief bill in December. All three programs also funded the PPP, which is meant to keep smaller businesses afloat by helping them with payroll expenses and rent. 

The American Rescue Plan adds roughly $7 billion to the PPP, which had previously already received more than $900 billion in allocations. The latest round of stimulus also includes $1,400 direct payments for eligible American citizens, as well as some expanded unemployment benefits, funding for states and cities and for vaccine aid, among other needs. 

The provisions of the stimulus package have far-reaching benefits for the economy and retail, said Stephen Lamar, president and chief executive officer of the American Apparel & Footwear Association.

“It’s a signal from the federal government that they’re going to make sure that the economy can sustain itself,” he said.  

“Broadly we’ve been pushing for a continuation of that…so that, as the supply chain and demand right themselves when the economy is fully open, we already have that momentum to recover as quickly as we possibly can,” he added. 

“Even relief that’s targeted to other sectors translates into relief for retail as well,” he said.  

The December stimulus bill provided for companies that had previously received PPP loans to apply for a second draw, if they could show hardship during the course of the pandemic in terms of declining revenues. The deadline for applications for that round is tentatively March 31, but lawmakers have introduced the PPP Extension Act of 2021 to move that deadline by two months, to allow companies until May 31 to submit their applications. 

On Monday, a group of retail trade groups including the AAFA, the National Retail Federation and others voiced their support for the extension, saying it was essential to allow smaller retailers more time during the ongoing crisis. 

The second draw loan program is geared toward smaller businesses than the original round of PPP loans. The program originally applied to employers with 500 employees or fewer, but the second draw imposed slightly more stringent requirements by reducing that upper threshold to companies with 300 employees or less. But the rule changes in December also expanded definitions for first draw loans, such that borrowers were eligible to go back and request additional amounts under the first loans. 

“I think what this does is it keeps dollars flowing in the economy, and, hopefully by the [third or fourth quarter], you’ll see consumer spending have a nice increase,” said Frank Kaufman, partner at accounting and consulting firm Moss Adams, where he is the retail national practice leader. 

PPP loans are critical for small retail apparel companies, especially given many stores are still either under occupancy restrictions as the pandemic persists around the country, experts said. And even in states that have lifted restrictions, there are still concerns about foot traffic. 

“These loans are a lifeline to keeping employees on the payroll, which in turn gives [retailers] an extra period of time during which they can continue operating and developing inventory or engaging in retail sales,” said Michael Mahoney, shareholder at Ogletree Deakins Nash Smoak & Stewart P.C., who advises clients on PPP loans. 

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