Following revelations that the Paycheck Protection Program authored by Susan Collins failed to get money to the states that needed it most, new reporting in the Wall Street Journal has documented how the PPP “left many of the hardest hit empty-handed.”


The program that Collins has spent over half a million dollars running campaign ads about is being criticized by experts for its “ridiculously complicated” structure that benefitted large chains and publicly traded companies and left many small firms scrambling to get answers. 


The Wall Street Journal: PPP Small-Business Loans Left Behind Many of America’s Neediest Firms


By Yuka Hayashi, Ruth Simon, and Peter Rudegair

June 18, 2020


  • Congress and the Trump administration, in their bid to funnel more than $650 billion in forgivable loans to small businesses struggling through the pandemic, delivered a program that didn’t work for many that needed it.


  • Yet the PPP left many of the hardest-hit empty-handed. Looking back, the program failed to take into account the near-countless varieties of small business, which employ nearly half of U.S. private-sector workers, and how best to help them, according to economists, business owners and bankers.


  • The PPP was most helpful to enterprises able to continue operations or quickly reopen. It largely failed those that either closed during prolonged lockdowns, drew too few customers to afford more than a skeleton staff, or were overwhelmed by high overhead costs, such as rent.


  • Some businesses were too small to have relationships with banks, which processed the loans, leaving small entrepreneurs—sole proprietors, mom-and-pop operations and the like—at the tail end of weekslong lines. Some had poor records or little, if any, payroll.


  • “They made a number of weak choices in designing the program as a loan program, when they wanted it to be a grant program,” said Josh Gotbaum, a former senior official at Treasury and the Office of Management and Budget who has worked for five administrations of both parties. The result, he said, was a “ridiculously complicated system that goes through banks.”


  • Lawmakers and administration officials didn’t anticipate the pandemic dragging on for months: Loans had to be spent within eight weeks, well before many businesses were allowed to reopen.


  • Some business owners said they didn’t apply for loans, or they returned the money because they didn’t think they could meet the requirements.


  • The unemployment rate in the U.S. surged from 3.5% in February to 14.7% in April before unexpectedly falling back to 13.3% in May. Larry Kudlow, director of the White House National Economic Council, said the PPP reduced job losses by keeping workers attached to employers.


  • Yet it isn’t clear the tide has turned. “I certainly think PPP has contributed to the better-than-expected numbers,” said John Lettieri, president and chief executive of Economic Innovation Group, a bipartisan think tank in Washington. “However, PPP-supported job gains, if that’s what is occurring, may be obscuring underlying conditions rather than reflecting them. One jobs report isn’t enough to draw big conclusions.”


  • It is too early to know how many companies that brought back workers with the help of PPP loans will be able to afford them once the money runs out. While the program was intended to keep workers on the job, its success depends on the survival of the small businesses that employ them.


  • Parts of the service industry affected by social-distancing rules were among the worst hit, accounting for 67% of jobs lost from March to May and receiving 42% of the loans as of May 30, according to economists at S&P Global Inc.


  • The hotel and food-services industry shed 40% of its jobs, 5.7 million, from January to May, the most of any economic sector. As of June 12, it had received 8% of the loans, trailing health care, construction and manufacturing, industries better positioned to weather the crisis, according to data from the SBA and Labor Department.


  • By contrast, professional, scientific and technical services providers lost 480,000 jobs, 5% of its total, and received 13% of the loans.


  • The shortcomings have yielded a patchwork of fixes. The SBA and Treasury issued 19 “interim final rules” to clarify and improve the PPP, which was part of the federal government’s $2 trillion-plus economic relief program. The congressional overhaul, signed June 5 by President Trump, gave businesses 24 weeks to spend the money and more flexibility on its uses. The changes, though, don’t help businesses that have already spent their loans.


  • The program was designed to work through banks and other lenders. That wasn’t an issue for hotel and restaurant chains, which were granted exemptions to the 500-employee cap. Shake Shack Inc., Ruth’s Hospitality Group Inc., owner of the Ruth’s Chris steakhouse chain, as well as other public companies and several wealth managers received PPP loans. When word got out, Shake Shack, Ruth’s and others returned the money.


  • Many small-business owners have few ties to banks beyond checking accounts. A survey released in April by the Federal Reserve’s 12 regional banks found that only 44% of small businesses with at least one employee had obtained a bank loan in the past five years.


  • Banks, which are expected to collect about $20 billion or so in PPP loan fees, also complained. Days before the program was to start, executives from the largest U.S. banks pressed SBA officials in a conference call for details about documentation and loan requirements. Without them, they said, banks wouldn’t be able to lend quickly, according to people who were on the call.


  • It didn’t seem the SBA understood the complexity of launching a national loan program in so short a time, these people said. For one thing, an SBA official on the call assumed banks already had payroll data from their small-business customers, one of the loan requirements.