» Small business relief program leaves billions on the table,
After a stumbling start three months ago, the government’s centerpiece relief program for small businesses is ending with money left over.
The Paycheck Protection Program wrapped up Tuesday after handing 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 is closing down with more than $130 billion still in its coffers.
“The fact that it was able to reach so far into the small-business sector is a major achievement, and those things are worth acknowledging and celebrat- ing,” said John Lettieri, chief executive of the Economic Innovation Group, a think tank focused on entrepreneurship. “But we’re still in a public health crisis, and we’re facing a long, slow, uneven return. 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 5 million businesses nation- wide, giving them low-inter- est loans to cover roughly 2 1/2 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: man- ufacturing firms with hundreds of workers, Main Street retailers with a few dozen employees, and freelanc- ers 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, espe- cially restaurants, restored millions of jobs by recalling laid-off workers and hiring new ones.
That is 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-thriv- ing practice was limited to emergency appointments only. For weeks, its sales were negligible.
T he loan he received through the program 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% of normal, and Stans- bury 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.
Other businesses did not 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 rela- tionships.
After a rush of early demand — the initial $349 billion set aside for the program was gone in 13 days — borrowing slowed significantly. The money left over after the final applications are received late Tuesday will stay with the Treasury.
Lenders cited two main reasons there was money left over. First, most eligi- ble companies that wanted a loan were ultimately able to obtain one. Also, the program’s complicated and shift- ing requirements dissuaded some qualified borrowers.
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 will not be fully reopening any time soon.
“If I’d known the rules were going to change, I would have done it differently,” Sin- gleton said. “But I had to go with the rules.”
When she received the loan, businesses had just eight weeks to spend the cash if they wanted to have the loan completely forgiven. So 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 was not ending anytime soon.
Congress amended the loan program in early June to give recipients nearly six months to use their aid money, but 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.