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The Senate approved an awaited $484 billion coronavirus relief measure on Tuesday, but how much it actually helps tens of millions of small businesses still in need of support will depend on its implementation and additional funding. 

The Paycheck Protection Program and Health Care Enhancement Act, which the House is expected to approve this week, would add an extra $310 billion to the paycheck protection program, the COVID-19 lending program overseen by the U.S. Small Business Administration that has had a rocky rollout. The package brings the total funding for the so-called PPP, which is meant to provide forgivable loans to small businesses, to $649 billion. 

The program, which began on April 3, was intended to help small businesses retain employees by helping to cover their payroll costs. The job losses from the pandemic have already been staggering, leading some 22 million people to apply for jobless benefits. There are nearly 60 million small business employees, according to the SBA Office of Advocacy’s 2019 small business profile.

Against that backdrop, the PPP’s implementation, especially through commercial banks that handled the deluge of applications by prioritizing existing clients and borrowers, has left many businesses waiting. The rollout was also complicated by the fact that smaller self-employed people and independent contractors weren’t able to apply until a week after the program began.  

“That wasn’t the intent, but they didn’t put in provisions to ensure that the banks didn’t behave exactly as they did,” said Rebel Cole, finance professor at the College of Business of Florida Atlantic University. Cole has previously worked at the Federal Reserve board of governors, and advised institutions including the International Monetary Fund and the World Bank. 

“The incentive was all wrong, it wasn’t [designed] to get the money to the small businesses that needed it the most, but it helped banks protect their preexisting loans,” he said.  

As of April 17, the program has provided payroll assistance to just 1.6 million of the 31 million small businesses in the U.S., or roughly 5 percent. The SBA defines small businesses as those with fewer than 500 employees, though it appears that the larger companies in that group received a significant chunk of the funding, even though many of the smaller businesses among them are some of the hardest hit, economic experts said. 

Of those that received the loans, just about 1.2 million were those who received loans below for $150,000, according to the SBA’s Paycheck Protection Program report on April 16. The relatively low loan amount is an indicator of the number of smaller small businesses who received those loans. In comparison, more than $150 billion of the originally allotted $349 billion for the program were loans that were for $1 million or more, indicating it was the larger-size businesses among the group that received them.   

“This was disproportionately going to the largest of small businesses, and the smallest businesses are being left out in the cold,” said Cole. 

Smaller businesses tend to be harder hit during crises — let alone a pandemic that has led to mandated store closures across the country — because of their relatively low cash buffers, experts said. According to a 2016 report by J.P. Morgan Chase & Co. Institute, just about half of all small businesses have enough of a cash buffer for 27 days if their revenues halted. For small businesses in the retail industry, that number was 19 days. 

The vulnerability of smaller businesses underscores the SBA’s role in supporting them during this crisis, said Karen Mills, senior fellow at Harvard Business School, and a former administrator of the U.S. Small Business Administration under President Obama.  

“The most important thing SBA can be doing right now is making sure we get money into the hands of small businesses who need it most, to help tide them over until they can reopen again,” she said. 

“The last thing we want is for small businesses to fail, to declare bankruptcy, and to close,” she added. “We know all too well from the financial crisis how difficult it was and the sheer amount of time it took for a business that closed to start up again.” 

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