The Three Errors of the Payroll Protection Program

Photo by Etienne Martin | Unsplash

Photo by Etienne Martin | Unsplash

As CEOs, CPAs, banks, attorneys, and business owners wrestle with the latest change and simplification of the Payroll Protection Program, it is also time to look at what went wrong. At a minimum, three aspects (what I call the “Three Ps”) were not considered during the haste to address the impacts of COVID 19, which compounded the already disproportionately adverse effects of the pandemic on people of color. They are Program, Process, and People.


The Program was flawed from the start. The intent was to allow businesses to retain and rehire employees. Due to the systemic racism in education, hiring, promotion, business loans, leasing, and other aspects of America, 95% of Black-owned businesses are sole proprietorships. The first round of the program emphasized the number of employees, which would result in minimal help towards the other, overwhelming costs associated with keeping the doors of small business open. Also, few safeguards were in place, resulting in big companies being able to suck up the original allocations. 


Next comes Process: These are issues like confusing instructions, low promotion of the rollout, unrealistic/changing deadlines, etc. These problems have been well-publicized, but the pandemic revealed other critical, unanticipated, or misunderstood issues and assumptions that hindered small and minority-owned business applications for PPP. One example is that the system was heavily dependent on automation. According to a Federal Communications Commission study conducted in 2018, there were more than 14 million people without any internet access and 25 million without reliable broadband access. With lack of access to hardware, software, the Internet, payroll management systems, and other methods of quickly collecting, compiling, and submitting data, the first-come, first-served approach hurt the small businesses that were most disadvantaged in the first place. The constant changes in the instructions, requirements, and other aspects of the application process did not help.


The third, perhaps the most important “P,” is People. A business owner’s ability to take advantage of PPP was very dependent on whom they knew. If one had a good relationship with a banker, they could access information and a more straightforward, favorable application process. With the closure of branches, reduced staffing, elimination of community relationship personnel, online banking, and on-going racial discrimination in giving loans to minorities, there was little chance that an average black person personally knew the name or number of anyone at a bank. Furthermore, the average black person probably did not have the book-keeper, CPA, lawyer on staff, or relative to help with the complicated process discussed earlier. 


It is hard to imagine all the motives, intentions, and lack of understanding of the people developing and running the process (legislators, bankers, etc.). Despite attempts to correct the urgent need of many small and minority-owned businesses, these issues were not met. Some of these same officials’ failure to provide more help in the form of additional stimulus bills, allocation to food, hospitality, and other hardest-hit industries spells doom for the many in the US. It ruins the strides made towards social and economic equality for all Americans.


Delving into the Payroll Protection Program provides insight into the importance of all of the programs, processes, and people that must be regarded to ensure any significant economic recovery from COVID-19.

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