Giving Compass' Take:

• Amanda Fischer explains that early research shows that small businesses in the areas hit hardest by COVID-19 were not the primary beneficiaries of the Paycheck Protection Program.

• What role can donors play in filling the gaps left by the Paycheck Protection Program? How can future efforts be shaped by the learnings from this program so that they better serve those with the greatest need? 

• Learn about supporting workers during COVID-19. 

As policymakers consider how to keep the U.S. economy stable while efforts to control the public health crisis continue, it is useful to evaluate the early research on the efficacy of the Paycheck Protection Program—most notably, whether the money went to the hardest-hit areas, encouraged firms to keep employees on payroll, and kept small businesses from going bankrupt. It is unlikely that any businesses—and particularly, small businesses—will be able to return to normal anytime soon, and the early evidence suggests that the Paycheck Protection Program is struggling to meet its intended goals. Examining what we know about the program can provide a roadmap on how to deploy aid to American small businesses moving forward. Here’s what the early research says:

  • The Paycheck Protection Program did not generally go to small businesses in the areas hit hardest by the pandemic in terms of coronavirus infection rates and COVID-19 deaths, social distancing measures imposed, or declines in employment.
  • For those businesses that received Paycheck Protection Program loans, the funding did not have a statistically significant impact on preventing avoidable layoffs among employees.
  • Financial institution composition had a large effect on how many loans an area received.
  • There exist significant gaps in our understanding of how Paycheck Protection Program funding served Black- and Latinx-owned small businesses.

In short, it appears that the Paycheck Protection Program was a successful liquidity backstop for firms that may have needed marginal help meeting payroll during the worst of the mandatory lockdowns, but it did not prevent layoffs.

Read the full article about the Paycheck Protection Program by Amanda Fischer at Equitable Growth.