Some say they won’t be able to rehire all laid-off workers

WASHINGTON — Some small businesses that obtained a coveted government loan say they won't be able to use it to bring all their laid-off workers back, even though that is what the program was designed to do.

The Paycheck Protection Program promises a business owner loan forgiveness if they retain or rehire all the workers they had in late February. But owners say the equation isn't so simple, in part because of current economic conditions and partly due to the terms of the loans.

As a result, the lending may not reduce unemployment as much as the Trump administration and Congress hope.

The government's $2 trillion relief package included $349 billion for the small business loan program, which was besieged with applications and ran out of money last week. Congress and the White House reached a tentative deal Tuesday that would provide another $310 billion.

To get the loans forgiven, companies need to spend 75% on payroll within eight weeks of receiving the money. The other 25% can be spent on rent, utilities and mortgage payments. Otherwise, the loan has generous terms: Only a 1% interest rate and six months before any principal is due.

Many of the small companies that were able to obtain a loan are having second thoughts about rehiring all their workers and a few plan to return the money. Others will use what they can on rent and utilities, and will use some to rehire a portion of their laid-off staff. But most are unsure they will be able to reopen eight weeks from now. They see little point in rehiring all their workers, paying them to do little or nothing, and then potentially laying them off again if business remains weak two months from now.

“You're turning the business into a pass through for the federal government,” said Joe Walsh, who owns Clean Green Maine, a cleaning service in Portland, Maine, with 35 employees. “You're doing very little to actually help the business.”

It's unclear how much the small business lending program can hold back the surge in joblessness — a record 22 million people sought unemployment aid in the past month. Most economists forecast the unemployment rate will reach between 15% and 20% when the monthly jobs report is released in early May.

More money is clearly needed: Roughly 1.6 million small companies were able to obtain loans, the Small Business Administration said, out of at least 6 million that were likely eligible, according to Census data. Bank of America economists estimate that another $650 billion would be necessary to meet demand.

Also, the generous unemployment aid that was also included in the government's relief package has made it more difficult to rehire. Many workers are making more with unemployment checks, which now include a $600 weekly benefit from the federal government.

Walsh, who received a $280,000 loan from the SBA, said that he is reluctant to push his employees to return to work because, under unemployment benefit rules, they could lose their weekly checks if they turn down potential jobs.