Under the federal coronavirus aid bill, as passed by Congress, the Small Business Administration (SBA) would guarantee “paycheck protection loans” for businesses with fewer than 500 employees, sole proprietors, independent contractors, and the self-employed. The loans could be used for payroll costs (except the compensation of individual employees over $100,000 annually), health benefits, salaries, mortgage interest payments, rent, utilities, and interest on other debt. The bill includes $349 billion for this purpose.

Loans could be forgiven, but loan forgiveness would be reduced if the number of employees or their salaries are reduced during the covered period (Feb. 15, 2020 to June 30, 2020). However, if there is a reduction in employees or salaries between Feb. 15 and 30 days after the date of the bill’s enactment but the employer eliminates the reduction by June 30, 2020, then the amount of forgiveness would not be reduced. (This provision could address concerns voiced by Ethan Stowell at the end of this Seattle Times story.)

The Congressional Research Service writes about the various SBA programs and notes that many of the provisions being considered today were also used in response to the Great Recession:

The current consideration of proposals providing for loan deferral and forgiveness is, at least partly, due to the unique economic dislocations resulting from individuals and households engaging in physical distancing to avoid COVID-19 infection.

As mentioned, because the coronavirus’s adverse economic impact is so widespread, including productivity losses, supply chain disruptions, labor dislocation, and financial pressure on businesses and households, there has been relatively little concern expressed about federal fiscal restraint during the current pandemic. The debate has been primarily over which specific policies would have the greatest impact and which types of small businesses and small business owners should be helped the most.

How far will the $349 billion go? In a recent paper, economists at the American Enterprise Institute estimate “the cost of replacing 80 percent of the revenue for three months of private-sector firms with fewer than 500 employees, excluding the manufacturing, health, education, and finance industries, to be $1.2 trillion.”

(For more on the federal aid bill, see here and here.)