Do small businesses need another round of PPP loans?
Small businesses have used up most of their PPP loans, and most say they would apply for new loans if Washington extends the program.
A new study finds that 75% of small businesses in the U.S. would consider taking a new federal loan to help them get through the current economic slowdown, if lawmakers in Washington agree to provide more stimulus spending.
The NFIB Research center survey assessed the impact of the COVID-19 pandemic on small businesses and how they were coping with the subsequent economic hardship. The organization has been tracking COVID-19’s effect on small businesses; this is the 11th report of the series.
Related: Navigating the PPP’s loan forgiveness rules
Although talks are currently stalled, lawmakers on both sides of the aisle have expressed interest in another round of stimulus spending that could include more Paycheck Protection Program (PPP) loans, which were a main feature of the earlier stimulus packages. That program expired on August 8, and despite the current stalemate, the upcoming election may motivate lawmakers to find a compromise sooner rather than later.
One of the main findings of the NFIB report was that 44% of small businesses surveyed said they would seek a second PPP loan; another 31% said they would consider applying for one. The study found that 78% of respondents applied for an earlier PPP loan and almost all of them were approved. Most borrowers (84%) have now used their entire loan, up from 71% in late July, the report said.
“The health crisis is not impacting small businesses equally,” said Holly Wade, NFIB Director of Research and Policy Analysis. “Small businesses are adapting to the abrupt shifts in consumer spending, managing customer and employees’ health and safety, and complying with state and local mandates, which are all creating additional stress for small business owners. Many of them still need more financial assistance just to keep their doors open and staff on payroll.”
Small businesses see federal help as a mixed bag
Small business owners reported some conflicted feelings about the earlier PPP program. For example, about one third (32%) said federal unemployment support to workers provided a disincentive; they said that amount of unemployment payment made it harder to hire or re-hire workers. But only 3% said they had to offer higher wages to get workers to come back; 4% said employees would only agree to working reduced hours to allow them to also receive the $600-a-week benefit.
On the other hand, 9% said there was a benefit to the $600-a-week payments because the program put more money in the pockets of customers.
Fear of liability is an issue for small business owners, as concerns have been raised that employees or customers may sue businesses for not doing more to protect them from the pandemic. However, about one third (31%) said they are not too concerned about legal action, 14% are not concerned at all. An additional third (34%) said it’s a moderate concern, and 21% listed it as a serious concern.
Overall, a majority of businesses that applied for PPP loans report being satisfied. The survey found 31% said they were very satisfied with the program, 45% said satisfied, 20% said somewhat satisfied, and 4% reported being not satisfied with the PPP program.
Small businesses concerned about economic conditions overall
A significant number of small businesses, 21%, said they will have to close their doors if economic conditions do not improve over the next six months. Another 19% of small business owners said they can hold on no more than 7-12 months if things don’t improve. The survey found 61% of companies said they do not anticipate any near-term problems.
More than half small businesses owners said they expect conditions to be back to normal in 2021; 20% said they expected it would be 2022 before economic conditions are normal. Six percent said that for them, conditions are back to normal now, and 19% said they expect conditions to be back to normal by the end of the year.
The survey found many small businesses owners are seeing a significant effect on sales from the pandemic. The survey found that sales levels were at 50% or less for about 20% of employers; 28% of small businesses said their sales levels were at 50% to 74% of what they were before the pandemic. On the other hand, 14% said their sales were exceeding pre-COVID levels, 50% said sales were nearly normal or better.
Workers are being affected by the illness
The survey found that 21% of small employers have had an employee take paid sick leave or family leave under a federal program, the Families First Coronavirus Response Act. The report said 30% of employers have claimed a tax credit other reimbursement for leave-associated costs as part of that program.
The report concluded by noting that some small businesses are doing better than others, but all are seeing new challenges because of the ongoing pandemic.
“The adverse economic impact of the health crisis on small businesses continues. It has been about six months from the onset of the health crisis and many small businesses are still struggling to survive,” the report said.
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