WASHINGTON -- Nearly $135 billion provided by Congress to help small businesses struggling to survive the COVID-19 pandemic was left on the table Tuesday as the Paycheck Protection Program stopped accepting new applications.
The program was so popular after Congress created it in March that it ran out of its initial $349 billion in less than two weeks and had to be replenished.
But the second $310 billion round of forgivable payroll loans didn't go as quickly after some large companies encountered public backlash and criticism from President Donald Trump for allegedly misusing the program, and others were frightened off by the program's vague, ever-changing rules, fearing they would be left on the hook for loans they could not repay.
The bulk of the total $519 billion lent by PPP went out the door by May 8. By that point, a total of more than 4.1 million loans worth $431 billion were issued. After that, demand fell sharply with just 590,667 new loans worth a combined $88 billion.
Some small businesses complained the rules were onerous and confusing.
There are "a certain number of small businesses that are looking at other options because they just don't want to deal with the headache," said Molly Day, vice president of the National Small Business Association.
The CARES Act, passed by Congress in March, required that companies use PPP loan money within eight weeks, with a June 30 spending deadline. On June 3, Congress extended that time frame to 24 weeks.
The law also originally required that companies spend 75% of their loan money on payroll in order to qualify for loan forgiveness. Congress lowered the payroll requirement to 60%.
Another obstacle for many businesses without banking relationships was the program's reliance on commercial lenders to distribute the funds. To get the money out the door quickly, the Small Business Administration based the PPP loan program on its existing 7a loan program, which is traditionally tapped by companies with 50 to 100 employees.
That "inherently locked out people who haven't engaged with a lender, haven't engaged with SBA," said Katie Vlietstra, vice president for the National Association for the Self-Employed. "We knew right away this was going to be a disaster."