14% of companies expect to fire workers after using PPP loans

A sign is seen in the window of a closed J.Crew store near Rockefeller Plaza on May 4, 2020 in New York City.

ANGELA WEISS / AFP via Getty Images

Approximately 14% of business owners who received a loan through the Paycheck Protection Program expect to fire workers once they run out of funds, according to a survey published by the National Federation of Independent Business.

The finding comes as lawmakers debate the need and contours of another round of federal aid measures for individuals and businesses, and points to the possible fragility of the United States’ economic recovery in the absence of additional aid.

The Check Protection Program, created by the CARES Act in late March, offers forgivable loans to small businesses.

‘A PPP story’

White House officials attributed the program to 2.5 million Americans who returned to work in May, a remarkable and unexpected change after nearly 21 million people lost their jobs the previous month amid wide swath closings. of the United States economy.

As a condition of receiving full loan forgiveness, the program requires companies to rehire hired or laid off workers.

“The PPP, I believe, led directly to the surprising and wonderful number of jobs we had last Friday, where roughly 3 million people who were laid off or temporarily suspended returned to work in the workforce,” Larry Kudlow, director of El National Economic Council told CNBC on June 10. “That is a PPP story.”

Despite states gradually reopening their economies, many business owners say they will likely need more help to weather the economic downturn.

More from Personal Finance:
Can I get unemployment after declining a job?
Universities reduce programs due to budget deficit
Is there a need for another stimulus test?

Nearly half, 47%, of entrepreneurs who received a PPP loan or loan through another relief measure, the Economic Disaster Injury Loan program, anticipates that they will need additional financial support over the next 12 months, according to the NFIB survey.

About 30% of business owners reported sales in mid-June that were less than half of what they were before the pandemic, according to the business federation, a trade group.

Businesses want more help

More than half of respondents (56%) said they would likely need $ 50,000 or less over the next year, while 27% anticipate that they will need more than $ 100,000.

If they don’t get extra help, the rebound in employment seen in May could be short-lived.

According to the survey, about 14% of PPP loan recipients anticipate firing workers after they run out of funds.

About half said they would fire between one and two workers, and 31% said they would fire three to five. About 12% said they would fire more than 10 workers.

Although it improved slightly last month, the unemployment rate of 13.3% in the US USA It is the highest in the country since the Great Depression in the 1930s.

Businesses can start running out of loan money as the enhanced unemployment benefits, in the form of an additional $ 600 a week for unemployed workers, expire in late July.

Potentially, that would send the household income for these workers off a cliff, while many may have already spent the stimulus checks that the federal government sent them in recent weeks.

The Small Business Administration, which administers the Paycheck Protection Program, has approved loans of $ 515 billion to almost 4.7 million companies.

The scope of a future coronavirus aid package is unclear.

Democrats are pushing for additional financial aid. The House passed a $ 3 billion aid package, the HEROES Act, last month. Republicans have advocated a more wait-and-see approach, saying they want a slimmer, more targeted aid package.

At the same time, the federal government recently enacted legislation that gives PPP loan recipients more flexibility, by extending the time frame for spending their funds and reducing the amount spent on payroll, for example.