The measures the government took to control the spread and curb the Covid-19 virus have affected many businesses. The small businesses affected by revenue loss were almost at the brink of closure when the government started thinking of them.
The government designed a way to help small businesses stay afloat during the pandemic period through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The government came up with the Paycheck protection Program loan program for small businesses where $659 billion was allocated for loans to small businesses.
The money allocated to this program was much more than that given to any other fiscal program. The loan program is intended to help small businesses hire back their employees, maintain their payroll, and cover all applicable overheads. For any small business that documented any rehiring or maintained their workforce, the loan will be forgiven by converting it to a grant.
Journalists started poking around the program and found loopholes, there were discrepancies in the loan details given, errors on the information of the business the loans were granted and the number of jobs saved did not add up. The SBA defended itself by saying the data reflected the information provided by the lenders.
Further digging showed that there were several businesses listed as beneficiaries of the PPP loans that did not receive any funding while others that received t loans had incorrect amounts listed. The latest SBA data is dated November 2020. It shows some industries needed the loans for different reasons other than working capital.
● Travel and transportation industry.
This industry wanted PPP loans from the PPP loan data to expand refinance and debt consolidating and buying new equipment. Since the industry was hit very hard by the pandemic, it needed less in payroll and labor funds. The businesses focused on more immediate needs. The businesses that sought PPP loans for expansion and equipment purchases did not anticipate the long-term effects that the pandemic caused.
● Agriculture, fishing, forestry, and hunting.
These businesses were heavily affected and there was a clear need to buy new equipment. They wanted the equipment to replace the lost labor force caused by the pandemic. According to Lantern by SoFi, “11% of all COVID cases through July 2020 were in the agriculture, forestry, fishing, and hunting sector, even though the sector makes up only 3% of the U.S. workforce.”
The small businesses in the education sector got the PPP loans for expansions, equipment purchasing, remodeling their locations, advertising, and marketing their services. In all business sectors, the education sector had the highest number of applicants asking for loans to help in marketing, distributing, and advertising.
Public schools were not eligible for the program’s loan, which means many private schools were applying for the loans and they met the criteria to receive them. The private schools sought to get advertising services to promote their homeschooling programs to parents whose children did not have alternative homeschooling facilitated.
Other industries that received the PPP loans are the construction and building industry, the hotel and hospitality industry, among other small businesses.