The “Small Business” Myth of the Paycheck Protection Program

Thomas W. Joo - UC Davis School of Law
Alex Wheeler - UC Davis School of Law
Vol. 54
Page 21

Congress responded to the pandemic-induced recession with the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. A highly publicized feature of the Act was the Paycheck Protection Program (“PPP”). Congress presented the PPP’s forgivable loans as a lifeline for small businesses reeling from loss of revenue. When initial funding for the program was quickly exhausted, the media, politicians, and the public excoriated large corporations, such as Shake Shack and AutoNation, for having taken millions in PPP loans.

This paper argues that despite the universal condemnation, large corporations like these acted consistently with the intent of the PPP. Instead, the real blame falls on Congress for carelessly designing a program without a coherent policy objective. Although politicians characterized the PPP as a rescue program for small business, it was designed to assist a wide range of firms, with no preference for very small, disadvantaged, or economically troubled firms. The PPP was not limited to businesses that lacked other access to capital, and explicitly included hotel and restaurant chains and large franchise networks. Despite its generous terms and wide applicability, the PPP also contained arbitrary and confusing restrictions on how loan proceeds could be used. The misinformed condemnation of large companies obscured the fact that Congress had designed a flawed program with limited ability to help small businesses.
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