Following the Money Trail: The Geographic Distribution of PPP Loans


The federal government’s Paycheck Protection Program (PPP), authorized by the CARES Act and administered by the U.S. Small Business Administration (SBA), sought to mitigate adverse economic effects of the COVID-19 pandemic on small businesses and their employees.[1] The PPP offered loans to help maintain workers on the payroll, facilitate rehiring as conditions improve, and keep businesses intact. The program incentivized businesses to retain workers by forgiving loans if the business maintains its average employee count and compensation, and if the money is used for payroll, rent, mortgage interest, or utilities.

The PPP opened for applications on April 3, 2020, and ended on August 8, disbursing 5.2 million loans totaling $525 billion with the participation of nearly 5,500 lending institutions. On July 6, the SBA released detailed loan-level data regarding the 4.9 million PPP loans that had been allocated up to that point.[2] In this research note, we use these loan-level data merged with county-level data from other sources to examine the geographic distribution of PPP funds.

Congress included the PPP in the CARES Act stimulus package because of the large concentration of small businesses within industry sectors most negatively exposed to the pandemic and the difficulties small businesses often have in accessing outside financing. Although it appears that more than enough PPP funds were made available (with untapped funds remaining when the program closed on August 8) and numerous anecdotes tell how small firms were helped by the PPP (for instance, see here and here), the effectiveness of the program has been called into question by some analysts and academics. For instance, it has been asserted that PPP funds were allocated to geographic areas not much affected by the pandemic and the “first-come, first-served” design created a disadvantage for the smallest of small businesses.

This research note presents new analysis, based on new data, which contradicts these assertions. Examining the allocation of PPP loan dollars per small business employee across U.S. counties, we find that the program effectively channeled loans to counties most affected by the COVID-19 pandemic. The nation’s largest banks—categorized as those with more than $50 billion in total assets—were particularly active in the areas hardest hit by the pandemic.

Specifically, a larger share of PPP dollars per small business employee flowed toward areas more affected by COVID-19 (as indicated by a decline in Google’s workplace mobility index.) Applying a multivariate regression model, we estimate that a county that experienced a 40-percent decline in mobility (near the upper end of the range of this variable) received $760 more per small business employee compared with a locality with a 10-percent decline (near the lower end of the range).

PPP dollars per employee also are positively associated with the share of local, small business employees at firms with fewer than 20 employees, contrary to the popularized notion that smaller firms faced less access to PPP funds.  The analysis also indicates that more highly populated counties received more PPP funds per employee.  This association may reflect either greater availability of, or more demand for, PPP funds in these communities.

The remainder of this note is organized as follows. The next section presents further institutional background on the PPP program, along with a discussion of other studies that have looked at quantitative aspects of the PPP. This is followed by a section devoted to describing our data sources, two sections that develop and present our analysis, and then a final concluding section.

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