Has anyone studied the actual uses of the Payroll Protection Plan (PPP) loans/forgiveness?
Because the pandemic totally devastated approximately 20% of the economy in sectors like travel, events, hotels and dining, it is hard to imagine how these industries have survived, or how the PPP money could have helped them for long. If they are still surviving, they are maybe 1/3 the size they had been before the pandemic. For them it has been tragic. Hopefully, they will come back as the economy reopens.
For businesses who didn’t slam shut last March, it is a different story.
My informal assessment of the businesses that continued to operate is that 30% of businesses that received PPP loans survived to fight another day due to the liquidity infusion as their sales dropped up to 50%. Since they had to maintain payroll in order to receive the loan, it also saved jobs until business recovered or the PPP money ran out and they had to lay people off.
The other 70% of companies saw their sales drop but had the resources to keep going and to keep their team employed because other expenses dropped like travel, trade shows, fuel, expansion plans, and marketing expenses. They trimmed their budgets and ended the year with extra liquidity. It wasn’t pretty, but they cut immediately. This was smart business practice. What are they doing with their PPP money?
Well, can I say this is delightful? They are investing in upgrading IT: finally getting that CRM software, A/P automation, upgraded ERP system. Some are staffing up for growth. Some are paying down debt. They are setting themselves up for solid expansion and growth with an unexpected and glorious loan/forgiveness from us the taxpayers.
Is this a good thing? I say, yes! These were good businesses before the pandemic. They employ a lot of people and their investment for the future means our communities will be more likely to thrive. If you have been conserving cash, now is the time to invest in those longer term projects that will make you more efficient or grow your business as the economy is recovering. Don’t wait too long.