What Do 25 Million Records of Small Businesses Say about the Effects of the PPP?
In response to the COVID-19 crisis, the US Congress created the Paycheck Protection Program (PPP), which offered government-guaranteed loans and grants to small and medium-sized businesses. The program’s goal was to preserve jobs at these firms, which had been hit especially hard by the pandemic-induced contraction in economic activity. This paper uses the Dun & Bradstreet database, which reports the financial condition and overall commercial viability of nearly 25 million firms, to study the allocation and effects of the PPP. It looks at how PPP allocation differed across firms with different pre-COVID financial-health profiles, how receiving a PPP loan affected a firm’s financial condition in the short and medium runs, and how the effects depended on a firm’s pre-pandemic financial condition. The paper also examines how accounting for firms’ pre-pandemic financial health affects the estimated impact of the PPP on employment.