Ever since the federal government began lending billions of dollars to small businesses pounded by the coronavirus pandemic, attention has focused on the program’s flaws: loose restrictions, technical glitches, and abuse by bigger companies and wealthy people who shamelessly exploited loopholes to qualify.
But all the legitimate criticism — and shaming of dubious recipients such as Tom Brady and the Church of Scientology — shouldn’t obscure the fact that the Paycheck Protection Program has successfully helped millions of US employers with up to 500 workers survive the shutdown of a big chunk of the economy.
In Massachusetts, 113,000 potentially forgivable PPP loans totaling $14.3 billion were approved through June 30, according to data released this week by the Small Business Administration. There is no tally of jobs saved, but Massachusetts recipients said in their applications the money would support more than 1.1 million workers.
“Our business would have been in serious financial trouble this spring,” said Doug DiMento, a spokesman for Agri-Mark, a dairy cooperative based in Andover, which received a loan in the range of $5 million to $10 million.
The milk producer and owner of the Cabot and McCadam brands of cheeses and other dairy products used its money to retain all 920 employees at four plants, after almost half of its revenue disappeared when restaurants and other food service customers began closing in March.
Agri-Mark also raised salaries to reflect the increased health risks of close-quarters work in its plants and spent “a lot of money” on temperature monitoring and protective equipment, DiMento said.
“It was the perfect vehicle,” he said. Without the loan, Agri-Mark was facing “some drastic options.”
At Circle, a digital currency startup, a loan in the range of $1 million to $2 million kept all 84 workers on the job.
“The PPP program has enabled Circle to continue to invest in jobs and product development,” Josh Hawkins, a senior vice president, said in an e-mail.
The companies that took PPP loans come from nearly every corner of the state’s economy. Of course there are the hardest hit: restaurants and bars, hotels, small retailers. But there are also law firms and private schools, health care providers and construction companies, ballets and bus companies, social service nonprofits and high-tech startups.
Launched in April, PPP provided low-interest bank loans of anywhere from a few hundred dollars to $10 million to cover about 10 weeks of payroll, with rules allowing up to 40 percent of the money to go toward expenses such as rent and utilities. The portion of the loan used for eligible expenses doesn’t have to be repaid. Some 4.9 million loans for $521 billion were issued nationally, and the program has been extended through Aug. 8 with the $132 billion left in funding.
The SBA’s rollout didn’t go smoothly. Websites set up by lenders were swamped. When the money ran out in just two weeks, many applicants didn’t know whether they had been approved. Congress scrambled to replenish the funding.
And some restaurants, bars, and other consumer-facing businesses were initially reluctant to spend the money to retain or bring back workers because they weren’t sure when they’d be able to reopen. The rules were changed to give borrowers six months, instead of the original two, to use the cash.
More bad publicity accompanied reports of publicly traded companies and businesses owed by billionaires getting PPP dollars. It was unseemly, though technically not against the rules, since the program was designed to help companies with nowhere else to turn.
The Treasury eventually clarified that the program was not intended for “a public company with substantial market value and access to capital markets,” and borrowers including AutoNation, Shake Shack, and the Los Angeles Lakers returned the money. Many more did not, including Kanye West’s Yeezy brand and well-heeled relatives of presidential son-in-law Jared Kushner.
Some academics have argued that PPP is an ineffective way to protect jobs. A working paper by researchers at the University of Chicago Booth School of Business and MIT’s Sloan School of Management found that the loans initially did not have a substantial effect on important measures of economic activity, such as business closings, hours worked, and unemployment claims.
“Firms appear to use first round funds to build up savings and meet loan and other commitments,” the researchers wrote. They expect to follow up and study how the all the money was eventually used.
That may be the view from 30,000 feet, but down on the ground PPP has had an immediate and beneficial impact.
At the Boys & Girls Clubs of Boston, many of the organization’s nearly 300 jobs were threatened when its 11 clubs were forced to close and switch to online programming. A $2.1 million PPP loan allowed the nonprofit to continue salaries and benefits — though 34 people were furloughed and 13 were laid off — and pay rent and utilities, according to executive vice president Dave Libby.
Donations, a major source of revenue, took a hit when the economy collapsed, Libby said. Without the government money, “there would have been significantly more layoffs. And we would have lost connection to our members and their families.”
Nearly $1.5 million in PPP money made it possible for the Conservation Law Foundation to not only protect jobs, but to increase its staff by four to 85 and go forward with paid internships for 13 students, according to Jake O’Neill, a spokesman for the Boston environmental advocacy nonprofit.
Like all restaurants, Legal Sea Foods was crushed by the coronavirus crisis, furloughing 2,500 workers when it closed all 32 restaurants. CEO Roger Berkowitz took a $10 million PPP loan, which he is using to cover benefits and vacation pay for his idled workers through August.
“We needed the PPP. It’s essential for our business and for taking care of our employees,” said Berkowitz, who has 200 workers on the job and is bringing back another 200 soon to open three more restaurants. “The economy would be in more turmoil if it didn’t exist.”
And that sums up PPP.
The program is far from perfect and it can’t solve all the economy’s ills. But a lot more businesses would be closed, and a lot more people out of work, if it didn’t exist.