Small businesses are about $28 billion in debt under the Paycheck Protection Program (PPP). Persistent debt includes loans made to small businesses since 2020 under the unforgiven COVID-19 relief package.
The unforgiven debt is part of more than $800 billion doled out over two years by the government to help small businesses stay afloat. The loans require small businesses to spend the money on payroll and other qualifying expenses within a set time frame.
$28 billion in unforgiven PPP loans still outstanding
About 11.7 million low-interest unsecured loans have been issued for more than $790 billion. Of which approximately $673 billion has been canceled in whole or in part, representing 82% ($9.36 million) of all PPP loan cancellation requests.
The Small Business Administration (SBA) and lenders have worked to provide more than 11.7 million loans totaling nearly $800 billion in relief to more than 8.5 million small businesses. Last year alone, the SBA approved more than 6.5 million loans totaling more than $275 billion. The average loan size was around $42,000 to $101,000 in 2020. Of total loans issued, 96% of loans went to businesses with fewer than 20 employees, compared to just 87% in 2020.
However, the $28 billion debt burden continues to pose challenges for small businesses that have taken out loans and are struggling to repay the loan. Small businesses that have rebounded after receiving PPP loans include those in wholesale, manufacturing and construction. While businesses that have been severely impacted by the pandemic and are experiencing a slow recovery include those in transportation and warehousing, educational services, and arts, entertainment and recreation.
Last year, payroll services firm ADP noted that small businesses lost more jobs in the spring, but have since gained more. And overall, in 2020, they lost 4.8 million net jobs, compared to 5.3 million jobs lost in large companies.
How PPP loans are canceled
Millions of small businesses across the United States have applied for and obtained loans through PPP. Loans can be fully forgiven if companies spend 60% of them on payroll as well as paying interest for the mortgage, rent and utilities. Small businesses that have taken out PPP loans can apply for forgiveness once all of the loan products for which the small business is asking for forgiveness have been used.
They can request a forgiveness at any time up to the maturity date of the loan. If small businesses do not apply for forgiveness within 10 months of the last day of the covered period, PPP loan payments are no longer deferred and they will begin making loan payments to their PPP lender.
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