The Paycheck Protection Program isn’t working for some small businesses, according to a new report by S&P Global Market Intelligence, a financial data research firm.
The report released Thursday indicates more than 150 businesses that in aggregate received hundreds of millions of dollars in PPP funding have announced plans to lay off thousands of employees. The report’s authors found the coronavirus crisis is hurting businesses for far longer than the original PPP program contemplated.
The companies—including music venues, hotels and fitness centers—received between $291.6 million and $647.5 million in total PPP funding. Still, those companies announced plans between May 1 and July 17 to lay off or furlough 15,814 employees, according to the analysis. In comparison, the U.S. Small Business Administration earlier this month said PPP funds helped save 51 million jobs, while S&P Global estimated the program saved a less robust 13.6 million jobs.
Roughly 44% of the layoffs in the S&P Global analysis are considered permanent, while businesses plan to rehire the affected employees in 27% of the cases. Future job status is unclear in the remainder of the layoffs.
S&P Global Market Intelligence conducted the analysis by matching businesses names on PPP loans to layoff notices. The report notes layoff notices were not available in six states—Arkansas, Hawaii, New Hampshire, Pennsylvania, Tennessee and Wyoming.
PPP funding provides forgivable loans from the federal government if at least 60% of the funds are used for payroll purposes and the company doesn’t lay off any employees, among other requirements. If a business breaks any of those requirements, the funding becomes a low-interest loan that will have to be paid back.
Music venues have been some of the hardest hit businesses during the pandemic, according to the report. Carnegie Hall in New York City received a PPP loan of $5.5 million but still furloughed 316 full-time, part-time and temporary employees after making the decision to remain closed until January 2021.
Second Round of PPP Could Be Coming
The S&P Market Intelligence Report comes just days after GOP senators announced their proposal for the next coronavirus stimulus package. The HEALS Act, a name used for a number of stimulus bills drafted by Republican senators, includes plans for a second round of PPP funding.
Introduced by U.S. Sens. Marco Rubio (R-FL) and Susan Collins (R-ME), the Continuing Small Business Recovery and Paycheck Protection Program Act would offer a second forgivable loan to businesses that can show at least a 50% reduction in gross revenues during the pandemic.
The proposal also would reform portions of the original PPP loan program criticized by small businesses, broadening the types of expenses eligible for forgiveness to include worker protection and operations expenditures, covered supplier costs like food orders for a restaurant and certain property damage incurred during protests. Some $100 billion would be allocated in long-term, low-cost loans to eligible “recovery sectors” of the economy.
“The PPP and the other small business provisions under the CARES Act have been an historic lifeline to millions of small businesses and tens of millions of American workers,” Rubio said in a press release. “Now, Congress must take action to help industries and businesses, especially minority-owned small businesses and those in low-income communities, that have been hit hard by the COVID-19 pandemic.”
It’s unclear when Congress will approve a second stimulus package. Top White House officials are currently negotiating with Democrats, but disagreements on liability protection proposals for businesses reporting cases of COVID-19 infection could delay progress.