The Paycheck Protection Program was a lifeline for millions of small businesses brutalized by the pandemic. Over a four-month span, the government program distributed $523 billion in forgivable loans to more than 5 million companies. The average recipient got just over $100,000.

And then there were the roughly 300 business that received loans of $99 or less.

Judith Less, who runs a thrift shop in New Jersey, got $27. Nikki Smith, a baker and caterer in Oregon, collected $96. A.J. Burton, the founder of a record label in Arkansas, got $78. And Susana Dommar, a chiropractor in Texas, received a loan for just $1.

Stephanie Ackerman, a self-employed college admissions consultant, was shocked when her loan deposit, for $13, showed up in her bank account.

“That’s supposed to help my business? It was a joke,” said Ackerman, whose company, Tomorrow Today College Consulting in Red Bank, New Jersey, lost months of sales last spring as the coronavirus crisis took hold.

The tiny sums were equally frustrating for the banks and other lenders that made the government-backed loans. For each, they were paid 5% of the value — meaning they collected just pennies on the smallest loans, far less than they cost to make. Ackerman’s loan netted her lender, Bank of America, a fee of 65 cents, paid by the government.


The profusion of minuscule loans is yet another illustration of how the relief program’s hastily constructed rules sometimes led to absurd outcomes. And they’re poised to be repeated: In last month’s stimulus package, Congress allocated $284 billion to restart the loan program, which ended in August, and give a second round of loans to the hardest-hit businesses. Lending is scheduled to begin this week.

An Afterthought

Congress created the Paycheck Protection Program in late March to help small businesses retain their employees through what lawmakers anticipated would be a short disruption.

Sole proprietors — self-employed entrepreneurs, including freelancers and gig workers who drive for Uber and Lyft and make deliveries for companies like DoorDash — were an afterthought. They weren’t eligible to apply for loans in the program’s first week. When it did expand to include them, the government created an alternate set of rules that blocked those individuals from receiving loans unless their business was profitable. That restriction did not apply to larger companies — meaning that unprofitable companies were eligible as long as they had salaried employees.

Small businesses were eligible to borrow 2.5 times their average monthly payroll, up to $10 million, to cover their workers’ wages and some other expenses, like rent and utilities. So long as most of the money was spent paying workers, the loan could be fully forgiven, giving recipients a rare infusion of free money to help them endure shutdowns and other disruptions as the pandemic wore on.

For companies without salaried employees, the Small Business Administration, which ran the PPP, told banks and other lenders to look at the profit the business owner reported on their 2019 taxes — even though payroll and profit are separate measures of a company’s business activity.

SBA representatives did not answer repeated questions about the rules the agency created for sole proprietors. But lenders and accountants — who have spent months poring over the program’s complicated and frequently revised rules — noted that the relief effort was focused on minimizing job losses, not preserving struggling businesses.


“What’s payroll for a solo entrepreneur?” said Sean Mullaney, a financial planner in California who worked on several clients’ loans. “This was created in almost in a fog of war, and there’s lots of scattershot things in it.”

Lenders didn’t win

The rule barring unprofitable sole proprietorships is a significant obstacle for lenders that work in vulnerable communities.

“It’s barbers, stylists, drivers, janitorial — really small mom-and-pop businesses. If they had a negative number on their Schedule C, they just weren’t eligible for anything,” said José Martinez, the president of Prestamos CDFI, referring to the tax form sole proprietors use to report their earnings.

The tiny loans were also unprofitable for lenders. The smallest loan made by Prestamos, a division of the nonprofit social service group Chicanos Por La Causa, was for $74. For that, it was earned a $3.70 fee. (Last month’s stimulus bill increased fees for lenders on loans under $50,000; they will now be paid half the loan’s value, to a maximum of $2,500).

Ackerman, the college consultant, kept her $13 loan, and plans to file the paperwork to have it forgiven. Others rejected such scant aid.

“I was so flabbergasted, I sent it right back,” said Jeff Ostashen, a self-employed trucker in Lakeland, Florida, who got a $17 loan from Wells Fargo. “It felt like a slap in the face.”

Still, Ostashen — whose sales have been slow since the pandemic began — plans to apply for a second loan. “I’m going to try again and see what happens, and hope and pray for the best,” he said.