After a stumbling start three months ago, the government’s centerpiece relief program for small businesses still has billions of dollars left over. But now the program has been granted a surprise extension.
The Paycheck Protection Program (PPP) had been scheduled to wrap up Tuesday after handing out $520 billion in loans meant to preserve workers’ jobs during the coronavirus pandemic. It still had more than $130 billion in its coffers.
However, late Tuesday, Democrats drove a temporary extension of the popular subsidy program through the GOP-controlled Senate, an unexpected development that came as spikes in coronavirus cases in many states are causing renewed shutdowns of bars and other businesses.
The move by Maryland Sen. Ben Cardin came hours before a deadline for applying for the program, which was created in March and modified twice since. Cardin, the top Democrat on the Small Business Committee, asked for unanimous approval of the extension of the PPP through Aug. 8.
Minority lawmakers are hardly ever successful in such attempts, but the pressure swayed Republicans controlling the Senate, who have delayed consideration of a fifth coronavirus relief bill and are preparing to go home for a two-week recess.
The original PPP has played a key role in keeping a struggling economy somewhat afloat.
“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 celebrating,” said John Lettieri, chief executive of the Economic Innovation Group. “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 frequently chaotic aid program, run by the Small Business Administration but carried out through banks, handed out money to nearly 5 million businesses nationwide, giving them low-interest loans to cover roughly 2 ½ 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.
Trying to comply with the rules, though, 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,” Singleton said. “But I had to go with the rules as they were at the time.”
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.
“We looked at this as a bridge,” she said. “Then our time was up, and there’s no solid ground to stand on yet.”
For Dr. Chris Stansbury, an optometrist who co-founded West Virginia Eye Consultants, which has seven offices around the southern part of the state, it worked out better. 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 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 Stansbury said he was cautiously optimistic that the worst had passed for his business. Nearly all of his workers are back on the job.
Other businesses did not have such a smooth experience. The program was marred by technical problems and confusing, frequently revised rules that frustrated borrowers and lenders alike.
After a rush of early demand — the initial $349 billion set aside for the program was gone in 13 days — borrowing slowed significantly.
The Associated Press contributed to this report