Layoffs Loom as Small Business Loans Run Out

Small business aid is likely to be another important component in the next coronavirus relief bill. Lawmakers are expected to extend the $660 billion Paycheck Protection Program, which provides forgivable loans to small business owners, with the goal of keeping workers on the payroll. The PPP still has more than $100 billion to loan, and Congress may add more to the fund while extending the deadline for participation.

However, some economists and business owners are questioning the design of the program, which was intended to provide a short-term bridge across a brief recession. Now, as the economic slowdown persists, some small business owners are finding that their loans are running out before their revenues have recovered, forcing them to lay off workers once again.

One small business owner described the program to The Washington Post this way: “It was just a Band-Aid on a bullet wound. All it really did was prolong the agony of having our workers file for unemployment.”

Diane Swonk, chief economist at Grant Thornton, told the Post that policymakers made a mistake with the program’s design. “It was the wrong bet. This wasn’t just a transitory event.”

One possible solution under consideration is to change the rules and allow small businesses to take out a second loan through the program. But the bigger and more disturbing question remains: What if millions of small businesses are unable to survive until the economy recovers, a process that could take years?

For more details on the PPP and small business owners struggling around the country, see The Washington Post story here.

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