Normally, the federal government has nothing in common with a small business. Most of its departments are not productive or profitable, yet they never close. Every year the government creates more debt than income, and yet it continues to expand. The government seems to have unlimited funds. When the government has cash-flow issues, it just prints more money.
The COVID-19 shutdown has been hard on both the government and businesses. The government has invested trillions of dollars trying to stimulate the economy and avoid a depression.
Much of that money was given to business owners in the form of the Paycheck Protection Program.
The goal of the program was to keep people employed during the economic contraction.
If the money is spent as directed by the program, the loan is forgiven. On the surface, this is a blessing for many business owners.
Despite its best intentions, the government may have made a huge mistake. This mistake could force many businesses out of business. If you own a business and received program funds, try to avoid this mistake.
The program establishes how the money must be spent to be forgiven. It may be used for payroll, rent, utilities and business debt. The government forgot to include the most important expense, which is marketing.
Without marketing, a business will not have customers. Without customers, there will be no revenue. Without revenue, no business is sustainable and it cannot continue to pay rent, utilities and debt. It will eventually go out of business. If it goes out of business, its employees will become unemployed. The government will have invested trillions of dollars and not achieved its goal.
If the government knew anything about running a business, it would allow marketing expenses to be forgiven. Otherwise, the Paycheck Protection Program may become nothing more than a temporary stimulus package.
