June 17, 2020

Paycheck Protection Program is Helping Small Businesses


  • Lenders and the Small Business Administration have approved more than 4.6 million Paycheck Protection Program loans totaling $513 billion. The average loan size is about $111,000.
  • The program is helping businesses across the country keep their workers employed as they absorb the economic shock from the COVID-19 emergency.
  • A new law President Trump signed on June 5 gives businesses more time to spend their loan and flexibility to spend more of it on non-payroll costs, to fit their needs and timeline for reopening. 

The Small Business Administration and lenders have approved more than 4.6 million Paycheck Protection Program loans, worth $513 billion. The program is keeping businesses connected to workers during the COVID-19 emergency. Congress set up the program in the Coronavirus Aid, Relief, and Economic Security Act and replenished it within weeks, when the funding ran out. It set aside funding for smaller lenders, and the Treasury and SBA reserved a share of the funds for lenders dedicated to reaching businesses in underserved communities. The PPP has gotten a total of $659 billion in program authority and $670.3 billion in funds to cover the loans and other costs. Authority to approve the loans ends June 30.

A Lifeline for Small Businesses

PPP Successes

According to a survey of small businesses by the Census Bureau, businesses requesting PPP loans are getting them. The week of April 26, 38% of businesses said they had received PPP aid, and roughly 75% of businesses said they had sought help through the program. By the week of May 31, the share of U.S. small businesses saying they had gotten aid had grown to 71%. The survey found that businesses in accommodations and food services; manufacturing; and health care and social assistance are participating in the program at the highest rates.

More Small Businesses Are Receiving Help through PPP Loans

PPP Successes

The program has been a lifeline for small businesses across the country:

  • Function 4, located in Sugar Land, Texas, provides IT and office-related products and services. It credited the PPP loan for its ability to hold onto its 89 workers. The owner of Eno’s Pizza Tavern in Dallas said the program was “a lifeline” that helped him call staff back to work.

  • Virginia-based Flags of Valor employs veterans who make wooden flags by hand. The owner said the company “restored our entire team back to work,” ended pay cuts for workers who had remained, and caught up on payments to its landlords.

  • A co-owner of Staub Manufacturing Solutions in Dayton, Ohio, said, “It was a lifesaver to get that funding” from the program.

  • In Charlotte, North Carolina, the pandemic forced the Goodyear House restaurant to close just six weeks after its grand opening. It has reopened partially, and the owner said the program enabled him “to put everybody back to work and see smiles on people’s faces, even if it’s under a mask.” Wilmington-based Bitty and Beau’s Coffee, which has five shops, was able to bring its 120 employees back onto payroll because of a PPP loan.

  • The Family Health Centers of Georgia, in Atlanta, which employs 120 people, was able to keep providing care for low-income patients, as well as continue making COVID-19 tests available. 

  • The owner of two men’s hair salons in Nebraska brought furloughed workers back on payroll. Business has flourished since they reopened in May, and they now have more staff than before.

  • The pandemic forced the Cheddar Box Cafe in Louisville, Kentucky, to offer only takeout service and let some staff go. When the restaurant was approved for a PPP loan, the owner said, “I’m going to try to have 75 to 80% of my staff back, do whatever I can to get them back.”

  • FireFly Automatix, a business that designs and makes turf-harvesting equipment in Utah, employs 135 people. Its CEO said the loan “has been a tremendous stabilizer, so we weren’t thinking about layoffs or cuts constantly, but we focused on innovation and efficiency instead.”

  • The Kansas City Zoo in Missouri, which reopened in mid-May, said that without the loan it “would’ve had to lay off somewhere between 30% and 40% of our staff.”

  • The owner of the Frog and Turtle restaurant in Westbrook, Maine, said the “program allowed us to bring back our 15 employees and sustain our business during these trying conditions.”

congress adds flexibiilty to the program

Under the CARES Act, businesses can get a PPP loan of up to 250% of their average monthly payroll costs, for as much as $10 million total. The federal government will forgive amounts the businesses spend on payroll, rent, mortgage interest, and utilities over an eight-week period. The SBA and Treasury said businesses must spend 75% of their loan on payroll costs. If they did not meet these terms, the government would forgive a smaller amount. Some businesses said they needed more time to use the loans, to match the pace at which they could reopen.

On June 5, President Trump signed the Paycheck Protection Program Flexibility Act into law. Under the new terms, businesses have 24 weeks to use their loan. This helps businesses that cannot reopen or resume normal operations quickly, due to economic conditions or government restrictions. Those that already had a PPP loan still can choose the eight-week timeframe. Businesses now must spend only 60% of the loan on payroll, letting them use up to 40% for non-payroll costs such as rent and utilities. This helps businesses located in areas with high rent. As one witness told the Senate Small Business Committee, “a business that cannot pay its rent will not be able to continue paying its workers.” Treasury and the SBA said that if businesses spend less than 60% of their loan on payroll costs, they could receive partial loan forgiveness, as long as 60% of the amount forgiven went toward payroll. Businesses now have five years to pay back any amounts not forgiven, instead of two under the original law. 

The Family Health Centers of Georgia, in Atlanta, which employs 120 people, was able to keep providing care for low-income patients, as well as continue making COVID-19 tests available.

Issue Tags: COVID-19, Labor, Economy, Banking