Relief is on the way again for small and medium-sized businesses that have been greatly impacted by the pandemic. The government relaunched the Paycheck Protection Program (PPP) on Monday, giving hard-hit businesses a second bite at the apple.
The Small Business Administration (SBA) said Friday that it is reopening the program on Monday to new borrowers, and Second Draw PPP Loans for businesses already in the program will be available on Wednesday.
The PPP, which was first created by the CARES Act in March, gives businesses forgivable government loans to keep workers on the payroll. The latest rescue package passed in December has allotted $284 billion in funding.
The second wave of relief is arriving at a time when businesses have been laying off workers at an increasing pace, as the resurgence of the COVID-19 pandemic takes its toll. Bars and restaurants have been decimated, according to Friday’s Bureau of Labor Statistics monthly jobs report, which showed the leisure and hospitality sector shed nearly half a million jobs in December and is still down 23.2% since February.
“With the pandemic raging, people are losing work and losing hope,” President-elect Joe Biden said Friday in a speech in which he nominated Isabel Guzman, director of California’s Office of Small Business Advocate, to lead the SBA. Biden noted the heavy drop in the leisure and hospitality sector, and said the ongoing job losses and closing of small businesses show the need for another rescue bill. “The job report shows we need to provide more immediate relief for working families and businesses now,” he said.
Second Draw PPP Loans are being offered on terms generally the same as the first: 5.2 million loans worth $525 billion. Loans of up to $2 million are available to businesses with less than 300 employees whose revenues decreased at least 25% between comparable quarters in 2020 and 2019.
The effectiveness of the first round of the Paycheck Protection Program has been disputed. The SBA said it saved more than 51 million jobs, while the figure was actually only 13.6 million according to an estimate by S&P Global Ratings chief U.S. economist Beth Ann Bovino. Companies mostly saved their PPP money or used it to pay expenses other than payroll, resulting in only 3.2 million to 4.8 million jobs saved, according to researchers at the National Bureau of Economic Research. They estimated in the November paper that each job that was saved cost taxpayers between $109,000 and $164,000.
In his Friday speech, Biden said the PPP’s benefits had been distributed inequitably.
“Mom and pop shops were often last in line while big, well-connected businesses jumped in front of the line and got more relief and got it faster,” he said.
Biden also said Friday that he will be laying the groundwork for a future relief bill this week with a focus on supporting small businesses and minority- and women-owned companies.