Impact of PPP on Small Businesses

Analyzing the Initial Impact of PPP Aid on Small Business in America, June ’20


First published July 2020

The federal government has made nearly $700 billion available to small businesses through the Paycheck Protection Program (PPP)—a forgivable loan initiative designed to help small businesses keep their employees on payroll as they deal with COVID-19-related disruptions to their work and revenue streams.

As we have detailed in previous reports, the necessary shelter-in-place mandates across the US have resulted in millions of small businesses being forced to make extremely difficult decisions in order to survive, including unprecedented levels of layoffs, furloughs, reduction in employee hours, moving to new states and creating completely new businesses. Aid from the PPP program was designed to be a crucial lifeline to buy enough time for the US to reopen for business.

To determine the initial effectiveness of government relief efforts, Gusto analyzed data from nearly 27,000 of our small business customers who reported receiving PPP loans and compared it to platform data from our 100,000-plus small business customers nationwide[1]. The report below shows that PPP aid has helped to provide stabilization from the initial free fall in March ‘20, with strong increases in hiring and rehiring beginning in the second half of April ‘20.

But our report also shows that PPP aid has not yet been enough to create a return to pre-COVID employment levels. New legislation passed by Congress extends the timeline and eases restrictions on how funds are used, which may help to speed up initial recovery efforts. Even with these changes, small businesses remain in a race against the clock to set up shop, rehire employees, and take care of fixed costs beyond payroll. And they still must navigate varying timelines for full reopening. In addition, most of the businesses that received PPP funding will have spent their PPP funds within the next few weeks while many of these businesses are still only able to partially operate.

Gusto will continue to monitor platform data and additional sources to better understand the effectiveness of PPP and other forms of government aid.

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