Issues & Insights

Keep PPP Targeted Toward Small Businesses

 

Since the first taxpayer dollars were spent for the Paycheck Protection Program (PPP), critics have lamented that large, politically connected companies are benefiting from forgivable, taxpayer-backed loans. And, reports abounded of wealthy Americans such as Robert DeNiro and Kanye West receiving PPP money.

Shortly after the program’s inception, reports revealed that more than 70 publicly traded companies received these loans meant for small, struggling businesses. But PPP loans are now being more properly targeted due to recent changes by the Biden administration. On Feb. 22, the government announced that through March 9, the Small Business Administration (SBA) was limiting PPP approvals to businesses with fewer than 20 employees. This stringent targeting should be a permanent part of policy to reduce cronyism and ensure that taxpayer help is limited to truly struggling businesses. During this difficult time, Washington must extend a hand up — not a handout — to well-capitalized businesses.

The lockdowns and restrictions marshaled to beat back the pandemic have exacted a heavy toll on America’s small businesses. The sad fact is that at least 500 of these establishments close every day, sending millions onto the unemployment rolls and forever altering the character of America’s neighborhoods. Fortunately, the emergency use authorization of multiple vaccines means that Americans may soon start shopping and dining out en masse again. In the meantime, Congress has set aside nearly $300 billion for another PPP round and has dispersed about half of that aid to approximately 2 million businesses. These dollars can and will continue to go a long way, but only if the program remains well-targeted. The new approval rules are critical to this targeting effort, since about 90% of small businesses have fewer than 20 employees.

But the SBA’s employee cap for PPP approval ended Tuesday, and the latest PPP round will end altogether on March 31. Meanwhile, small businesses applying to the program have had to deal with a flurry of error codes and unexpected difficulties while trying to get a much-needed cash infusion. This, coupled with the slow pace of SBA guidance regarding loan calculations, has produced plenty of unneeded stress during an already-difficult time.

While Congress can act to extend the PPP deadline, it seems more keen at throwing more dollars at the program rather than giving struggling businesses more time to apply. In addition to application-related pressures, small business owners who have already received PPP loans in the past are concerned that they’ll need to pay back their loans — with interest — to the federal government. Only about a third of approved loans have been forgiven thus far, with far more waiting in limbo due to confusing procedural hurdles. “PBS NewsHour” reports “borrowers must show that 60% of the money was spent on payroll, but a number of business owners … said that information regarding this part of the application process had been scant.”

Clearly, the federal government could stand to revamp its approach to the PPP. For starters, clearer communications, firmer guidance, and fewer “error codes” would give struggling small businesses less to worry about. Congress should also move to extend the deadline, ensuring that allocated dollars are properly dispersed before throwing more taxpayer dollars at the program. Policymakers should examine ways to give small businesses with fewer than 20 employees a permanent preference in the program even as the relief effort slowly phases out. Congress and the Biden administration should put already appropriated taxpayer funds to the best possible use and give a hand up to hurting small businesses.

Ross Marchand is a senior fellow for the Taxpayers Protection Alliance.

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1 comment

  • I agree. That is the democratic way. Republicans want to keep the money for themselves and keep others from voting, the only way they can win today.

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