Paddy Murphys posted this sign on their door. Activity along Main Street in downtown Bangor has slowed down since the coronavirus hit Maine.

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The forgivable federal loans aimed at helping businesses stay afloat and pay their employees have unexpectedly caused a conundrum for some owners who are holding off on rehiring workers and others who are considering giving back all or part of the money.

At the heart of the problem is the conditions on how and when the money can be spent in a way that the business owners can get the loan forgiven. Many say the U.S. Small Business Administration still hasn’t provided clear guidelines on forgivable uses of the money.

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The Portland Hunt & Alpine Club cocktail bar in the Old Port laid off 12 people when it closed in mid-March, though it will reopen Thursday with a staff of three after Maine’s liquor regulator allowed “cocktails to go” to be served along with food under certain guidelines.

Since he doesn’t want to take on a loan, owner Andrew Volk said he expects to return any unused portion of the money to the government since “it doesn’t make sense to pay the full staff to not work.”

“We can’t assume we are going to be forgiven for this money so we’re being very cautious and treating it as a loan and assuming it is not forgivable,” he said.

The so-called Paycheck Protection Program has been wildly popular since it was included in a federal stimulus package passed last month. Roughly one in 10 small businesses in Maine got a total of more than $2.2 billion in loans in the first round of the program, according to data from the office of U.S. Sen. Susan Collins, a Republican who championed the program.

A second tranche of money opened on Monday, though a lack of clear guidelines on forgiveness persists. The National Federation for Independent Businesses, an advocacy group, found in a recent survey that only half of the businesses that applied for loans expected to get full forgiveness while 3 percent planned to use more than half of the funds as a low-interest loan.

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On its website, the SBA says the loans will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent and utilities. At least 75 percent of the forgiven amount must have been used for payroll. The employer must quickly rehire the same number of employees it had before the pandemic and maintain salary levels by June 30.

But Katie Krakowa, a lawyer who advises business clients at Murray Plumb & Murray in Portland, said the SBA still hasn’t provided guidance on what constitutes payroll under the program. Guidance was expected last week, but she said it may not come for another few weeks.

Some businesses are giving bonuses to increase payroll costs and loan amounts, though Krakowa was not sure if those costs would be forgiven. At the same time, she said the money can give businesses time to make changes that could ensure long-term survival.

“People are overwhelmed now by being in a tough position, having this large amount of money and being fixated on forgiveness,” Krakowa said.

The loan must be spent within eight weeks of receiving the funds. But some businesses will be largely or entirely shut during that period, and they say rehiring without having work for employees doesn’t make sense. If all of the paycheck program amount is not spent or forgiven, it turns into a loan of 1 percent to be repaid over two years. Any remaining funds also can be returned to the government.

It is unclear how the gradual reopening measures announced by Gov. Janet Mills on Tuesday will affect hiring. Starting June 1, Maine will allow tentative reopening, under certain circumstances, of restaurants to dine-in service. Bars could reopen in July or August. Different types of hotels and campgrounds would see openings from June through August depending on whether they meet safety requirements.

Shahin Khojastehzad, co-owner and general manager of Novare Res Bier Cafe in Portland, said owners are in a tough spot because they might not get the forgiveness if they don’t have enough employees returning. But if the staff doesn’t return, he may have to hire other people.

Khojastehzad had a staff of 16 before the coronavirus hit, and four have agreed to return. He said many employees are making more on unemployment, given the extra $600 per week from the federal government on top of regular benefits. Staying on unemployment keeps them out of harm’s way too, he said.

“We’re stuck between a rock and a hard place,” he said. “My staff is my family and all can have their positions back if they want them.”

Bob Smith, owner of Sebasco Harbor Resort in Phippsburg, said he may not qualify for full forgiveness, but he’s willing to take on a low-cost loan.

Smith has 128 bedrooms in 40 buildings at the resort, including cottages. He has delayed opening from May 14 until June 9, but he has hired 15 workers so far and plans to hire another 25. Some will be from out of state and will have to be quarantined for 14 days per state requirements.

“I don’t know if I’ll be able to hire enough people to get forgiven,” he said. “Still, this loan is helping me stay open.”

Another change this week to the paycheck loans created a Catch-22 for businesspeople like Smith. Collins announced Monday that the U.S. Treasury had created a new rule aiming to give more flexibility to seasonal businesses applying for the loans.

The maximum size of the loan had been calculated using the applicant’s average monthly payroll costs during a continuous 12-week period in 2019 beginning Feb. 15 or March 1 and ending June 30. The new rule allows seasonal employers to use any consecutive 12-week period between May 1, 2019 and Sept. 15, 2019. But the rules about spending the money eight weeks after receiving the funds or by June 30 may still apply.

“Using the summer season as the basis of my loan would have made it substantially higher, but I’m not that busy yet,” Smith said.

Watch: Janet Mills outlines her plan to reopen

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