Coronavirus: PPP outlook as states loosen lockdown restrictions

Yahoo Finance’s Brian Cheung joins Zack Guzman to discuss the Paycheck Protection Program, as Axios reports PPP "appears to have missed the mark," according to a soon-to-be-released paper from S&P Global chief economist Beth Ann Bovino.

Video Transcript

ZACK GUZMAN: A lot has been done to support small businesses here in the country-- of course, the Small Business Administration's Paycheck Protection Program has been the main vehicle to get support out to those businesses in need. But new research is out today highlighting that a lot of those efforts may have been wasted in terms of getting the money to those most in need.

That comes from S&P Global, out saying that a lot of the PPP's first round largely skipped over states and industries that were hardest hit by the coronavirus crisis. And for more on that, I want to bring on Yahoo Finance's Brian Cheung, who has the details. Brian.

BRIAN CHEUNG: Hey, Zack. Well, the report that you're mentioning is a forthcoming report from S&P as originally reported by "Axios," saying that a lot of those industries and states that really needed that Paycheck Protection Program money didn't ultimately get it. Keep in mind that the Paycheck Protection Program data, as reported by the Small Business Administration, said that as of last week, about 39% of that second round of funding is actually still available.

But the jury is still really out on whether or not the program has been effective in targeting those businesses that really need it-- one example being accommodation and food. We have a chart that shows only about 9% of the money from the first round-- because, keep in mind, we're in the midst of the second round of PPP money-- only 9% of that first round actually went to those in the accommodation and food industry, those restaurants that, as we know, have been particularly hard hit on Main Street.

But as we know from the April numbers, 31% of the total non-farm payroll were lost in that month were actually in that field. So 31% job loss, only 9% of the PPP money-- there is a little bit of an incongruence there. But as we know, the PPP road is really far from over, right? The next big concern is going to be loan forgiveness for the companies that did ultimately get a PPP loan. How can they actually prove to the SBA that they deserve to have this converted from a loan into a grant? What types of documentation do they need? And just whether or not the actual period of forgiveness can be extended-- keep in mind, there's still chatter on Capitol Hill about extending that eight-week forgiveness period to something as long as 24 weeks, which just shows, Zack, that for those companies that got those PPP loans, the journey is really far from over.

ZACK GUZMAN: I mean, when we look at some of the other points in the report, you talk about the service industry, leisure and hospitality-- those are the hardest hit, as we've been highlighting, in terms of job losses, but still a lot of struggles there and a lot of-- I mean, we've highlighted the lawsuits over a lot of the big banks supposedly, allegedly giving priority to some bigger clients there.

So there's a long list of complaints with the program, but it does seem like that one aspect you're talking about in terms of extending from an eight-week period to potentially a 20-week period, 24-week period of letting those businesses use those funds does seem to be something that both Republicans and Democrats are agreeing on now. But how big of a lag between getting that fixed and when the money is out there, it's going to be impactful, because we talk about businesses that need the money upfront. You don't get it to them when they need it, they're closed. There's no bringing those businesses back. So how problematic is that, really, at the end of the day?

BRIAN CHEUNG: Right. And, Zack, when you talk about the fix, there is no single fix that's going to make all this better. I think what we're realizing is that as this PPP program has been dispersed out to businesses, it's really been kind of reactive as opposed to proactive effort from the SBA and from those on Capitol Hill to try to tighten the nuts and bolts of the minutiae of this thing to, A, kind of lay out exactly what the terms are for how these businesses can get that loan forgiven and actually have it converted from a loan to a grant.

And one big concern is just the fact that 75% of that principal actually has to go to payroll costs. You have a lot of businesses right now saying, well, if I'm in a high cost area like New York City or California, which we know are the most hit, my rent costs are actually higher than payroll, so I still will end up going out of business anyway. So it seems like Congress might be trying to change the terms of that so that you actually can spend less than 75% of the loan on the actual payroll costs. But again, it's just been a huge mess. But as we know, those companies that really need that money, you just hope that they ultimately got it and hope that, for a little controversy that we've seen from some of those big businesses, that that's the minority case as opposed to the majority case.