The Paycheck Protection Program was designed to help small business weather the coronavirus pandemic while keeping their workers employed.
But government data suggests that hundreds of thousands of businesses across the country got access to funds without indicating how many jobs would be saved.
On Monday, the Trump Administration released data on the small businesses nationwide that received loans through the $669-billion Paycheck Protection Program. The loans distributed through the program were partially or fully forgivable depending on how much of the proceeds were used to keep employees on payroll.
The Small Business Administration has said the program has helped support about 51 million jobs. Yet, wrinkles in the data point to issues the federal government will face when keeping businesses accountable once it comes time to verify whether the loans they received will be forgiven.
A MarketWatch analysis of the government data found that just over 554,000 small businesses who got PPP funds reported retaining zero jobs. Nearly 50,000 of these business had received loans larger than $150,000, and more than 300 have received loans between $5 million and $10 million.
Thousands more companies did not report how many jobs their loans saved. “Government data is horrific,” said Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, a nonprofit think tank. “This is this common pattern of these government reports.”
Businesses were asked to provide information on the number of jobs that would be saved on their applications for PPP loans, a Treasury Department spokesman said, but they were not necessarily required to provide it. To receive loan forgiveness, the companies will be asked to supply information regarding how people they employ and what those workers are paid.
Some business said the data released regarding the number of employees retained was incorrect. Meridian Behavioral Healthcare, a mental health care provider in Gainesville, Fla., received a loan between $5 million and $10 million through the program, and according to the government data, it retained no employees. The company told MarketWatch that in fact it has retained all of its employees and used PPP funds to do so.
“ Only 2% of small businesses who received PPP loans expected less than half their loan expenses to be forgiven, according to one survey. ”
Similarly, Missouri-based staffing firm SyllogisTeks was reported as having retained zero jobs despite receiving a loan larger than $5 million through the Paycheck Protection Program. A spokeswoman for company said all workers have remained employed. “‘Jobs Retained’ was not a field we were asked in the application process and we have not received any additional information directing us to provide that information since we were approved,” she said. “We are looking into how we are able to update this data.”
A survey conducted by National Federation of Independent Business, the largest trade group in the U.S. that represents small businesses, found that most PPP loan recipients planned to put the money toward approved uses — such as payroll costs — that would entitle them to forgiveness.
“The vast majority of PPP loan borrowers applied for the loan specifically for the forgiveness element of it,” said Holly Wade, NFIB’s director of research and policy analysis. Only 2% of businesses expected less than half their loan expenses to be forgiven, but Wade said this was more a reflection of companies having trouble meeting the criteria than them having applied for a loan with no intention of using it for payroll.
The lack of data will make accountability challenging
The incorrect or missing data regarding the number of workers these businesses kept employed throughout the pandemic exposes problems in the design of the PPP program, researchers say.
“The government was offering free money, and businesses were lining up around the corner to take it,” said Aaron Klein, a fellow and policy director of the Center on Regulation and Markets at the Brookings Institution, a Washington, D.C.-based think tank.
Part of the problem, Klein said, is that the government relied on banks to administer the program, decentralizing the process. As a result, the information collected about each business can vary from bank to bank, or even loan officer to loan officer. The large volume of loans banks were expected to process didn’t help matters, either.
“It’s not the bank’s job to screen the applicant’s true need or use,” Klein said.
“ ‘If you’re not even asked how many employees you started with in the application process, then you’re in big trouble.’ ”
The discrepancies could come to a head when it comes time to determine which businesses are eligible for forgiveness and which will pay the money back with interest. “It’s going to be a big mess,” de Rugy said. “Companies that have done everything right will be denied forgiveness, and vice versa.”
“If you’re not even asked how many employees you started with in the application process, then you’re in big trouble,” de Rugy added.
Additionally, exemptions have been made since the PPP program was first announced to give more leeway to businesses such as restaurants and retailers that were ultimately unable to bring many people back to work because of health restrictions.
“The jobs retention will be complicated,” Wade said, because businesses could have used the proceeds to stay afloat in other ways, such as paying rent or for inventory. “The loan is likely directly supporting hires later on.”