Over $100B in PPP loans left unclaimed in U.S. relief aid

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Back in April, when the Small Business Administration was approving about $25 billion in coronavirus loans a day, lawmakers and companies were concerned that $669 billion in relief would run dry, leaving countless mom-and-pop businesses hanging.

Yet the Paycheck Protection Program had more than $100 billion in funding left as of last Saturday, with only days remaining until the SBA stops taking new applications on June 30.

The PPP loans were a lifeline for the more than 4.7 million companies that got assistance — with an unprecedented $516.5 billion approved over two rounds in less than three months. Still, demand waned after an initial barrage. Millions of the smallest and most vulnerable businesses didn't know they were eligible or didn't apply because the complicated program didn't meet their needs.

Now, there's debate in Congress about what to do with the leftover PPP money, and how to reach those businesses as the economy reopens in the midst of new virus outbreaks across the country.

"There's strong bipartisan interest in protecting the funds that have been appropriated to develop a second round, but to have it targeted more to those small businesses that really need the help," Sen. Ben Cardin, the top Democrat on the Small Business and Entrepreneurship Committee, said in a phone interview. Republican Sen. Marco Rubio of Florida, the panel's chairman, has also suggested another phase of targeted relief.

Small businesses stand temporarily closed in Portland, Oregon, on June 17.
Small businesses stand temporarily closed in Portland, Oregon, on June 17.

Having leftover funds is a surprising outcome for the Paycheck Protection Program, the centerpiece of the $2.2 trillion relief package Congress enacted in March in response to the pandemic.

It's a testament to both its success and its limits. The criteria to turn the debt into a grant, chiefly by spending a large chunk of the money on payroll, suited larger employers better than mom-and-pop stores and the self-employed. The PPP loans, disbursed via approved lenders, also were harder to get for businesses in low-income communities that often are shut out of the traditional banking system.

The initial $349 billion in PPP funding for forgivable loans was depleted in just 13 days, and almost $189 billion of a second round of $320 billion was tapped in the first two weeks after the program relaunched April 27. The program, designed for the 30 million U.S. businesses that have fewer than 500 employees, has stalled since mid-May, leaving about $128 billion available as of June 20, according to the SBA.

Whatever remains after the final applications are processed will be returned to the Treasury unless Congress acts to repurpose them. The SBA and Treasury Department are "focused on ensuring that small businesses and nonprofits in underserved communities access the program with the remaining PPP funds and time," the agency said in a statement.

Cardin has proposed a bill with Democratic Sens. Chris Coons of Delaware and Jeanne Shaheen of New Hampshire that would extend the application deadline to Dec. 31 or longer. It would also create a new option for a second loan for borrowers with fewer than 100 employees that have lost at least half their revenue because of the pandemic.

House Small Business Committee Chairwoman Nydia Velázquez, a New York Democrat, is also negotiating a bipartisan bill, a spokesperson said. Other proposals call for direct subsidies, and Congress could act on individual measures or include them in a broader stimulus package expected to be negotiated in July.

"The needs going forward are going to be significant," said Holly Wade, director of research and policy analysis for the National Federation of Independent Business. "The economy's certainly a long way from normal economic activity, there's still many business restrictions on how owners can open or expand."

Like other government programs in Europe, the U.S. stimulus package likely helped prevent job losses during the lockdowns. Three months into the crisis, many of those programs are being phased out or nearing expiration, leaving companies to face difficult decisions.

Created in haste as lockdowns brought business activity to a halt in March, the PPP had a chaotic launch. With rules coming late and repeatedly changing, many U.S. borrowers worried they'd be stuck with debt, unable to convert it into grants. Public outcry about larger entities including Shake Shack Inc. and the Los Angeles Lakers getting funding, plus threats of audits and criminal action by the Trump administration, compelled companies to return loans even if they thought they were eligible.

Data released by the SBA shows that the amount of loans approved actually declined by billions of dollars in May as loans were returned and duplicates were canceled. The SBA hasn't provided details about cancellations, but Treasury Secretary Steven Mnuchin has said about $12 billion in loans was returned.

By mid-May, the process had smoothed and the majority of owners who applied got a loan. A U.S. Census Bureau survey showed that 72% of respondents on average had received funds through June 13.

Among those least likely to use PPP were Black- and Hispanic-owned businesses, with more than nine out of 10 having no employees, according to the Center for Responsible Lending.

They include Crystal Thomas, 30, the sole owner of an event-planning company in Atlanta. She said she was frustrated that larger businesses were able to get funding and attributed her lack of success getting a PPP loan to not having a personal relationship with a lender to help navigate the process.

"I don't believe that was fair," Thomas said. "You're able to see where other people were given favor, and that should have not been the case."

Jovita Carranza, the SBA administrator, said in a June 18 interview on Fox Business Channel that businesses with fewer than 10 employees were still on the sidelines, because they were apprehensive and some of the documentation for the program "was a little bit cumbersome."

The SBA took steps in the final weeks to encourage lending to the smallest businesses, including by offering an online tool to match businesses and nonprofits with lenders.

Different approaches may be needed to help the small outfitsthat still need assistance but are the most difficult to reach, said Tom Sullivan, vice president of small-business policy for the U.S. Chamber of Commerce.

"Why is there so much money left? The very simple answer is because we know there's need, but it's hard," Sullivan said. "It's really hard."

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