If small businesses are suffering so much, why is $130 billion in Paycheck Protection money still available?

Are small businesses really suffering? That depends on the business. Unfortunately, the biggest mistake people make when talking about “small business” is to sweep all of them into one big generalized group. You can’t do that in a country as large as this. 

Sadly, that’s what the government is doing. And that’s why the Paycheck Protection Program is stalling.

Last weekend President Trump signed a bill that extended the Paycheck Protection Program – the act of Congress that offers forgivable loans to small businesses to help them cover payroll and other expenses – until August 8th. Why? Because there’s still roughly $130 billion remaining of the original $670 billion authorized.

But wait: All we see in the media are stories about how so many small businesses are suffering. Stores are shuttered, perhaps permanently. Bankruptcies are predicted to soar. And now, as COVID-19 cases rise, business owners are terrified that their local governments will shut them down…again.

For sure, many businesses are suffering, and we are in the midst of a serious economic recession. But if things are so bad for small businesses, why is it that out of the $670 billion allocated to the Paycheck Protection Program, only $540 billion of loans have been extended?

How can there be so much money left over? The issue is more confounding when you consider that just 5 million of the approximately 30 million small business owners took advantage of the program. Sure, there are 6 million employer-firms in the U.S., and the program was designed to maintain their employees. But many of the loans extended were to freelancers, solopreneurs and independent contractors. And many others were extended to firms that maybe didn’t really need the money at all, so it all kind of evens out.

Which brings me back to those other 25 million companies that didn’t take advantage of the program.

Some say they didn’t take advantage of the program because they’re concerned about taking on debt. But that issue was resolved with the Flexibility Act, which extended the forgiveness period to 24 weeks, a time frame that most certainly would result in most of these loans being wiped off their books (and any remaining balances due in five years’ time at a measly one percent interest rate). A few want to remain independent and not rely on taxpayer money. Many rural and minority-owned companies did not apply because of their lack of knowledge and resources. Others say that many small businesses who took the loans earlier have now run out of funds and are in need of more help as rising cases threaten more shutdowns and the economy is slow to recover.

All true. But there’s something else that explains the 25 million. While restaurants, retailers, salon owners and other consumer-facing businesses have been drawing media attention, the vast majority of firms – those that manufacture, perform construction, provide services, create technology, sell online and distribute parts and products – have been muddling along without government help.

Why? Because they had cash reserves, lines of credit and other resources. They’re located in areas not hit as hard by the pandemic. They have low overhead. Their supply lines and customer channels are diversified. Or they simply lucked out and weren’t forced to shut down. “We’re an essential business, so we’ve just been working through this,” one client told me. Many other clients and business owners I work with have reported the same. These times are tough, but they’re still selling.

Then, of course, there are the small firms that have prospered. There’s the cleaning company in Tampa who’s been “crazy” busy, the St. Louis firm that’s been breaking records selling puzzles, games and toys, the small firms benefiting from the e-commerce boom and the artisans on Etsy selling masks like hotcakes.

There are many examples of small firms not just surviving but prospering in these times, and I guess that’s why the National Federation of Independent Business’s latest Small Business Optimism Index, though drastically off its historic highs, has fallen down only to the levels we last saw in 2016 and well off the troughs of the Great Recession.

What does this mean for PPP? It means that Congress should stop trying to satisfy all small businesses in this vast country and instead focus the remaining (and perhaps additional) funds (along with additional educational resources) on those industries and business types that truly need it the most. By this I mean retail, restaurants, hospitality and minority-owned and rural businesses. 

You can’t generalize when you talk about small businesses in the U.S. The country is just too big. For PPP to truly work, it must be truly targeted.

Gene Marks is founder of The Marks Group, a small-business consulting firm. He frequently appears on CNBC, Fox Business and MSNBC.