Larger small businesses are more likely to receive a COVID relief loan compared to smaller businesses according to a survey by Bench.co. More than 60% of the businesses with annual expenses exceeding $500,000 have received either a Paycheck Protection Program (PPP) or an Economic Injury Disaster Loans (EIDL) loan. This is compared to smaller businesses with $50,000 or less in annual expenses accounting for 20% of those who got a PPP or an EIDL loan.
So far though the PPP loan is advertised as forgivable, but only 6% of small businesses who were lucky enough to get the loans have had their loans forgiven so far. This number is likely to increase as the end of the 10-month deferred payment period comes to an end.
PPP Loans Not Getting to Smallest Businesses
Of the 10,000 small businesses surveyed only 27% had received PPP loans with a majority either being ineligible or barred from the COVID relief. The survey found 17% of those who had received a PPP loan, 10% received the EIDL and a further 10% received both relief loans.
Other findings of the survey include:
- Out of the 6% who had received loan forgiveness two-thirds (72%) received forgiveness on the entire PPP loan.
- Less than a fifth (16%) of those that had applied received forgiveness on less than 90% of their PPP loan.
- E-commerce, software, and web content businesses that were the least affected by the pandemic represent 70% of businesses that received no funding at all.
- Businesses such as bars, restaurants, gyms, and fitness centers received 50% of some form of COVID relief.
- Payroll-intensive businesses in hard-hit industries received the largest PPP loans relative to their annual expenses. Businesses in arts and entertainment received the largest PPP loan amounts of around 12.5% of their annual expense levels. While restaurants and bars saw PPP loan amounts of almost 10% of their annual expenses.
Why are Smaller-sized Businesses Receiving less COVID relief?
According to Bench the reason smaller businesses received or are receiving less financial relief could be because they had low to no payroll costs- as per PPP eligibility requirements. This would also mean that smaller-sized businesses would be eligible for small loan amounts. Furthermore, larger-sized businesses have relatively larger resources to dedicate to understanding the PPP and submitting an application compared to a one-person operation.