Small Business Loans During Pandemic Saved Over 3 Million Jobs, Study Says

Small business loans issued by the U.S. government saved between 1.4 million and 3.2 million jobs during the coronavirus pandemic, a new study has found, well short of the 51 million claimed by the Trump administration.

The study was released by the Massachusetts Institute of Technology and the Federal Reserve. It found that the Paycheck Protection Program raised employment by 2% to 4.5%, based on payroll data through the first week of June.

The program distributed roughly $500 billion in loans via the Small Business Administration to help businesses pay employees during shutdowns. These loans will be forgiven if these businesses invest most of the money in payroll, do not fire workers or rehire laid-off employees.

“The evidence to date suggests the PPP was certainly not perfectly targeted in terms of reaching only firms or regions in the most need,” the reports stated. “Even so, it was delivered to a substantial number of small and mid-size firms, many of which were likely facing acute liquidity needs.”

While the study may have found a positive impact, the Paycheck Protection Program has been criticized for numerous shortcomings in its implementation. Most notably, several large, public businesses that were not severely impacted by the pandemic were found to have received loans, instead of those that really needed them.

“The program was structured to take advantage of existing banking relationships that favored established businesses,” John Arensmeyer, CEO of the advocacy group Small Business Majority, said about the deficiency. “It was not designed for very small businesses.”

In addition to this, many small businesses that needed the loans reported having difficulty in applying. Even more businesses claimed that the conditions of the program’s loan forgiveness kept them from applying, as they believed that they still would have to lay off employees.

The paycheck program was set up under the more than $2 trillion CARES Act and made more than $660 billion available to businesses with fewer than 501 employees.

A Reuters analysis of the program indicated 827 companies reported saving 400 jobs with a loan of less than $150,000, and 200 of them reported saving at least 400 jobs with $5,000 or less.

Meanwhile, the Justice Department has charged more than a dozen people with defrauding the program, including a reality television personality who applied for more than $5 million in loans.

Of the 30.7 million small businesses in the U.S., just 4.2 million received the emergency loans.