WHATA RELIEF: "As COVID-19 and its economic impacts continue, policymakers likely will keep exploring various relief measures, including additional funding for businesses with ongoing need that can demonstrate a reduction in revenue.".

• Author: Schultz, Laura
• Position: BUSINESS & FINANCE

THE Federal Paycheck Protection Program (PPP) was designed amidst the COVID-19 pandemic response to help small businesses keep their workers on payroll during a period of forced shutdown or diminished services. Small businesses generally are defined as those with fewer than 500 employees. In 2017, there were 31,700,000 small businesses employing 47.1% of U.S. workers.

The first of its kind program was administered by the Small Business Administration (SBA). Businesses could apply for loans to cover eight weeks of payroll costs, later extended to 24 weeks as the program adapted to business needs. The businesses also were allowed to use the funds to pay other necessary expenses to stay open, including interest on mortgages, rent, and utilities. If the businesses retained their workers on payroll, the loans would be eligible for forgiveness.

The program initially was authorized with $349,000,000,000 of funding as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27. So many businesses applied for the program, however, that funds ran out by April 16. The program then was extended with an additional $310,000,000,000 through the Paycheck Protection Program and Health Care Enhancement Act of 2020 and SB A resumed accepting applications for round two on April 27. The end of the PPP program likewise was extended from June 30 to Aug. 8. SBA has released detailed data on lending activity related to PPP. While economists have begun to explore the impact of the program in looking at this data, it will be several months at least before we understand how effective PPP has been in achieving its goal of keeping workers employed and businesses afloat. The data suggests that health care and professional services sectors successfully used PPP to retain workers. PPP was not as successful in offsetting job losses in the service sectors, such as retail trade, accommodations, and food services.

It also should be noted that the job retention data for a given business is a preliminary number reported at the time of the application based on current employment. The number of jobs actually retained will not be available until borrowers file for loan forgiveness.

The Paycheck Protection Program is an innovative initiative of tremendous scale not previously tried in the U.S.--and the rollout was rocky. Businesses faced challenges submitting applications, as lenders grappled with insufficient guidance and technical glitches paired with high...