Paycheck Protection Program is out of funds for most small businesses

Black-owned businesses face obstacles with Paycheck Protection Program

The Paycheck Protection Program, a key part in the federal government's economic response to the coronavirus, is nearly out of funding. Only $8 billion remains in the program, which has distributed nearly $800 billion in forgivable loans since launching more than a year ago.

Although the Trump administration billed the initiative as geared to small businesses, a significant share of the relief initially went to companies with thousands of employees or to the franchisees of large companies. A loophole in the Small Business Administration (SBA) program allowed money to be distributed to restaurants and hotels that would generally not be considered small businesses.

The most recent round of Paycheck loans launched in early January with $284 billion in funding. The American Rescue Plan, which was passed in March, added another $7.25 billion to the program.

The $8 billion in remaining PPP funds are earmarked to be distributed through community financial institutions, which generally make loans to businesses that are run by women, minorities and other underserved communities. That leaves the application window closed for most businesses.

That's a few weeks earlier than expected. The program was set to wrap up May 31. The SBA said it will still fund loans that are already in the application process, but will not be taking new applications.

"After more than a year of operation and serving more than 8 million small businesses, funding for the bi-partisan Paycheck Protection Program has been exhausted," a spokesperson for the SBA said in a statement on Wednesday.

A mixed legacy

As policy aimed at shoring up millions of businesses while the economy reeled during the pandemic, the PPP's legacy is likely to be mixed. The popular program, which provided ultra-low interest loans to cover employer payroll and other expenses, was able to distribute billions of dollars in assistance early on in the crisis. 

The biggest draw was that the loans were completely forgivable, interest and all, as long as the companies that were granted funding didn't lay off any employees during the loan period. The program's first round of funding, which amounted to $350 billion, was used up in just 13 days.

Paycheck Protection Program seen as "fertile ground" for scams

But the program came under fire for distributing a sizable portion of those funds to both large companies and companies that didn't seem to have been directly impacted by the pandemic. A number of big  chains, including burger chain Shake Shack, upscale steak house Ruth's Chris and car dealership AutoNation, ended up giving back the tens of millions of dollars they got from the program after public backlash. Some banks also were sued by small businesses for allegedly favoring larger clients in distributing the loans. Some of those suits have been dismissed.

"Broadly it seems to have done what it expected to do," Rich Prisinzano, director of policy analysis at the Penn Wharton Budget Model, a nonpartisan research group at the University of Pennsylvania's business school. "It saved jobs."

Exactly how many jobs the PPP saved remains a source of debate. 

Initially, the SBA said the program saved 50 million jobs. But that number, which was based on the number of workers at firms that received the loans and not necessarily jobs saved, was quickly dismissed. The Treasury Department has since put the number at 19 million, while some studies have suggested it's much lower. An MIT study from last year estimated the first $500 billion in PPP loans saved 2.3 million jobs, a cost of about $224,000 per job saved.

Dean Baker of the Center for Economic and Policy Research, a left-leaning think tank, thinks the PPP helped keep many businesses open and preserved jobs. 

"This was a good thing and makes us better prepared for the reopening we are now seeing," he said.

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