Some 300 companies that received government loans linked to the Paycheck Protection Program (PPP) pandemic have filed for bankruptcy, according to a Wall Street Journal analysis released Tuesday.
Many companies, which altogether employ some 23,400 workers, said the loans were not enough to keep them afloat, especially since there were no additional stimulus payments even as the pandemic was getting worse.
The Journal said its estimate of failed businesses was very conservative, as it only analyzed the program’s large borrowers, who made up about half of total loans, but only about 13.5% of all loans. participants.
In addition, many small businesses are content to liquidate when they run out of cash and do not go bankrupt.
The total amount loaned to companies that ended up going bankrupt is between $ 228 million and $ 509 million, with half of the 285 companies identified by the Journal having filed for bankruptcy since August.
The hospitality industry has been hardest hit among companies receiving PPP loans, with restaurants and hotels that filed for bankruptcy employing nearly 6,600 workers, the most of any industry.
The government has not focused on the risk of bankruptcy for companies receiving loans, as the goal was to quickly deliver cash to workers affected by coronavirus shutdowns.
The loans were guaranteed by the Small Business Administration as long as funds were spent on qualifying expenses such as payroll, the Journal reported, so the government is likely to suffer significant losses.
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