The Paycheck Protection Program (P.P.P.) Is Ending, With Money Left Over

The Paycheck Protection Program (P.P.P.) Is Ending, With Money Left Over

The Paycheck Protection Program (P.P.P.) Is Ending, With Money Left Over

After a stumbling start, the government’s centerpiece relief program for small businesses was closing down on Tuesday — although it may turn out to be a temporary hiatus.

In just three months, the Paycheck Protection Program handed out $520 billion in loans meant to preserve workers’ jobs during the coronavirus pandemic. But as new outbreaks spike across the country and force many states to rethink their plans to reopen businesses, the program had more than $130 billion still in its coffers.

It might not be gone for long, though. Late Tuesday, just a few hours before the program was scheduled to shut down, the Senate approved a five-week extension. It wasn’t clear when the House might take up the bill.

John Lettieri, the chief executive of the Economic Innovation Group, a think tank focused on entrepreneurship, praised the program, calling the aid it provided to small businesses “a major achievement.” But there was still work to be done, he said.

“We’re still in a public health crisis, and we’re facing a long, slow, uneven return,”
he said. “Millions of businesses still have their survival at risk.”

The hastily constructed and frequently chaotic aid program, run by the Small Business Administration but carried out through banks, handed out money to nearly five million businesses nationwide, giving them low-interest loans to cover roughly two and a half months of their typical payroll costs. Those that use most of the money to pay employees can have their debt forgiven.

The cash went to a wide variety of companies: manufacturing firms with hundreds of workers, Main Street retailers with a few dozen employees, and freelancers working for themselves. The loans ranged from a few hundred dollars to $10 million, and allowed businesses to keep paying employees — even if they had nothing to do but sit at home.

The program appears to have helped prevent the nation’s staggering job losses from growing even worse. Hiring rebounded more than expected in May as companies in some of the hardest-hit industries, especially restaurants, restored millions of jobs by recalling laid-off workers and hiring new ones.

That’s how it played out for Dr. Chris Stansbury, an optometrist who co-founded West Virginia Eye Consultants, which has seven offices around the southern part of the state. He furloughed 40 employees in late March after a statewide stay-at-home order, when his once-thriving practice was limited to emergency appointments only. For weeks, its sales were negligible.

The loan he received through the program on April 16 gave him a financial safety net as he began to reopen — with a host of new health precautions — in early May. Sales are back to around 90 percent of normal, and Dr. Stansbury said he was cautiously optimistic that the worst had passed for his business. Nearly all of his workers are back on the job.

“If we hadn’t had this money to get us through, things would have been pretty dire,” he said. “I don’t think we would have been able to reopen all of our locations right away.”

Other businesses didn’t have such a smooth experience. The program was marred by technical problems — like overtaxed computer systems that crashed — and confusing, frequently revised rules that frustrated borrowers and lenders alike. Some banks limited their lending to companies with which they already had relationships.

After a rush of early demand — the initial $349 billion set aside for the program was gone in 13 days — borrowing slowed significantly. Any money ultimately left over will stay with the Treasury.

Before the Senate vote late Tuesday, Treasury Secretary Steven Mnuchin told members of the House Financial Services Committee that he had been in discussions with senators from both parties about allowing the remaining funds to be repurposed. A few hours later, the Senate approved legislation that would extend the program to Aug. 8.

Lenders cited two main reasons there was money left over. First, most eligible companies that wanted a loan were ultimately able to obtain one. (The program limited each applicant to only one loan.) Also, the program’s complicated and shifting requirements dissuaded some qualified borrowers, who feared they would be unable to get their loan forgiven.

Trying to comply with those rules was a challenge for many businesses.

Tracy Singleton closed her farm-to-table restaurant in Minneapolis, the Birchwood Cafe, in mid-March and laid off all but a handful of her 62 workers. She received a $382,200 loan in early April, a week after the program began, and soon spent it all — even though she won’t be fully reopening any time soon.

Ms. Singleton said she might have chosen to spend the money more slowly if things had been different. “But I had to go with the rules as they were at the time,” she said.

When she received the loan, businesses had just eight weeks to spend the cash if they wanted to have the loan completely forgiven. So Ms. Singleton, who had switched to curbside pickup sales, brought back dozens of workers, brainstorming new projects for them to tackle. Her payroll ballooned from a skeleton crew of eight to a peak of 48 employees.

But as the clock ticked down to the end of her eight weeks of support, it became clearer to lawmakers that the downturn wasn’t ending anytime soon.

Congress amended the loan program in early June to give recipients nearly six months to use their aid money, but Ms. Singleton had already spent most of her funds. When the money ran out, she laid off workers again. She is down to a staff of about 20.

“We looked at this as a bridge,” she said. “Then our time was up, and there’s no solid ground to stand on yet.”

Congress has been bitterly divided about what any new stimulus package should look like. But little other help is on offer for small businesses: Companies with fewer than 500 workers can turn to another Small Business Administration program, the Economic Injury Disaster Loan fund, but it has struggled with overwhelming demand and has imposed a $150,000 cap on its loans. The Federal Reserve’s new Main Street Lending Program offers loans of $250,000 and more, but on more onerous terms.

Small businesses employ about half of America’s nongovernment workers, and a fresh wave of deep reductions or permanent closures would quickly cascade through the national economy. The pain would be even more acute in hard-hit industries, like the service sector, and communities that disproportionately rely on small employers.

Some of those employers, like Ms. Singleton, are weighing their bottom lines against the continued uncertainty of the pandemic.

Even though Minnesota has allowed restaurants to reopen for outdoor dining and limited indoor seating, Ms. Singleton has stuck with curbside pickup. She is watching with dread as infection rates soar in areas that relaxed their restrictions and is wary of putting her employees or customers at risk.

“I frankly don’t think it’s safe,” she said. “You can really only reopen once. If we had to open and shut down again, that would be a nightmare.”

Emily Cochrane contributed reporting.

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