NEW YORK (AP) – The Trump administration has distributed an estimated $ 530 billion to millions of small businesses to protect them from the sharp decline induced by the coronavirus.

The question is: how effective will the paycheck protection program be?

Some small business owners say the program’s low-cost loans have allowed them to avoid layoffs or rehire staff – and they appreciate the loans being canceled if they spend most of the money to save money. jobs.

However, even with these incentives, the program faces a stark reality: unemployment is reaching Depression-era levels and a deep recession has taken hold on the main streets of the country even as states begin to restart. their savings.

The program was criticized for some missteps: applications were delayed early on because government computers were overwhelmed; large corporations and publicly traded companies have received loans while many moms and dads have been left out of the first round of funding and it remains unclear exactly what conditions businesses must meet to have their loans canceled.

A challenge for many small businesses is deciding how to use the money. For the loan to be canceled, at least three-quarters of the money must be spent on paying the workers. But with the economy frozen and their customers at home, some owners are reluctant to call back staff they don’t need.

Below is a more detailed look at the successes, failures and unknowns of the program.

WHAT ARE THE BENEFITS FOR COMPANIES?

The Small Business Administration has so far approved loans to nearly 4 million businesses. Now in its second round of funding, an increasing number of loans are going to smaller businesses. The average loan size in the first round of financing of $ 349 billion was $ 206,000; On Wednesday, the average loan amount for the second round was $ 75,000. Supporters like Marco Rubio, R-FL, head of the Senate Small Business Committee, note that many loans are made by community banks to local businesses.

The immediate injection of cash allowed companies to keep workers on the payroll or rehire them, as well as paying rent or mortgage interest and utilities.

The loan money means that many laid-off workers could return to their jobs. And that has ensured a salary for those who are still working.

ARE THERE ANY DRAWBACKS FOR COMPANIES THAT HAVE OBTAINED LOANS?

Many homeowners are concerned that they will not get the loan forgiveness promised by the program and be forced to repay the money. The fears stem from the requirement that companies spend 75% of the loan money on workers’ wages to have the loans canceled. But owners whose businesses remain closed say they need the money to reopen; restaurants, for example, have to order food.

Katie Vlietstra, an executive at the National Association of Self-Employed, wonders whether, instead of a forgiveness, loans should be converted into grants. She says the data yet to be collected on the program can help determine whether, in the event of another pandemic, “is this the right vehicle to support small businesses?”

HAVE SOME BUSINESSES BEEN LEFT?

Some companies that applied for the first round of the April 3–16 program had to wait weeks to see if they would be approved; some are still waiting.

A US Chamber of Commerce-MetLife survey after the first round found that while nearly a third had applied for loans, only 9% had obtained them.

“We should be looking at the number of applicants versus the number of recipients of PPP loans,” says Karen Kerrigan, CEO of the Small Business & Entrepreneurship Council advocacy group.

John Arensmeyer, CEO of the Small Business Majority advocacy group, wonders if the loans actually went to the companies that need them most.

For example, “the entire hospitality industry got 9% of the money and 50% of the layoffs,” Arensmeyer said.

Additionally, many small businesses use freelancers rather than employees, especially businesses that need workers with different skills. But freelance salaries are not covered by the program, and because the loan amount is based on employee compensation, many businesses were limited in what they could borrow.

“I could only apply for a small loan – less than $ 35,000 in total – and I tried to do it when there was a business downturn,” says Theresa Maloney, owner of Cogenta Communications, a San-based marketing company. Francisco. She has one employee and hires 10 to 20 freelancers per year.

WERE THERE ANY DISADVANTAGES FOR THE WORKERS?

Companies with up to 499 workers shed more than 11 million jobs in April, according to payroll service provider ADP. This includes companies waiting for their PPP loans. And many companies are suspending plans to hire new workers, according to a survey by the National Federation of Independent Businesses advocacy group of its members last month.

Some workers called back to work after being made redundant must choose between working and receiving unemployment benefits which may be more lucrative for some. The federal government gives the unemployed $ 600 a week until July 31 to top up state benefits.

Owners find that some employees are too nervous to return, especially in workplaces with a lot of public contact. If landlords report these workers to state governments, they risk losing their unemployment benefits.

WHAT’S STILL IN THE AIR?

With more than 33 million Americans filing for unemployment benefits in the past three months, one way to judge the program’s success is how many companies can now afford to rehire them.

“(Unemployment) claims and bankruptcies will give us an idea of ​​whether help has arrived quickly enough to avert a disaster,” said Joe Brusuelas, chief economist at the accounting and consulting firm RSM US.

The American Bankruptcy Institute trade group reported that Chapter 11 reorganization cases rose 18% in March and 26% in April from the previous year, as the fallout from the virus began to be felt.

A loan from the program can help a business – and its employees – cope with an immediate cash shortage. Yet many other struggling small businesses are expected to file for bankruptcy or close, if not in the near future, at least in the future. Businesses like retailers and restaurants have an uncertain future if they are to continue to operate with social distancing requirements.

Once companies have the money, it’s up to them to adapt to the changed environment, says Erik Asgeirsson, a senior executive at the American Institute of Certified Public Accountants.

“It’s a bridge to keep businesses going and then all businesses will have to revisit their business model,” Asgeirsson said of the program.

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