The Paycheck Protection Program: Small Business Balances, Revenues, and Expenses in the Weeks after Loan Disbursement

Abstract

The Paycheck Protection Program (PPP) was an unprecedented effort to provide liquidity to and support the payroll of small businesses impacted by COVID-19. Leveraging daily transactions from a de-identified dataset of small businesses that hold Chase Business Banking deposit accounts and received PPP loans, this report explores loan amounts relative to all operating expenses as well as small business cash flows in the weeks before and after PPP loans were disbursed. The analysis includes businesses that received PPP loans in May and July 2020 and shows that the loans helped bolster small business cash balances and supported expenses during a period of depressed revenues. In particular, we found: (1) Among firms with PPP loans, the proceeds were typically enough to cover 3.8 weeks of expenses; (2) PPP increased the typical small business cash balances by 136 percent, supporting an immediate increase in expenses; (3) Other COVID relief programs and transfers may have bolstered balances of firms that received PPP loans later. While the program supported payroll as intended, policymakers should note that payroll is just one of the many expenses small businesses face and consider that relief for small businesses, especially the vast majority which are nonemployers, may need to encompass more than payroll assistance.