From the end of 2019 to the end of the second quarter of 2020 alone, small loans to businesses at community banks, a proxy for small business lending, increased by 39 percent.2  The Impact of the PPP during the Pandemic One driver for the increase in small business lending was, of course, the Small Business Administration’s Paycheck Protection Program or PPP.
The PPP was funded by the U.S. Treasury Department through forgivable loans that enabled small businesses to maintain payroll, retain employees who may have been laid off in response to the social distancing protocols that went into effect in April 2020, or to cover other overhead costs.