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How Small Businesses Used the First Round of PPP to Survive: 9 Things We Learned in 2020

How Small Businesses Used the First Round of PPP to Survive: 9 Things We Learned in 2020; Find out more about how small businesses used the first round of PPP to survive and how small businesses aim to retain employees with the second round of PPP.
LanternUpdated May 20, 2021
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
In 2020, the coronavirus (COVID-19) pandemic wreaked havoc on small businesses, leaving them wondering how to keep the lights on and doors open. In an effort to support small businesses, the U.S. Small Business Administration (SBA), in consultation with the U.S. Treasury Department, opened the first round of the Paycheck Protection Program (PPP) in April 2020. The PPP loans were offered by SBA-approved PPP lenders to incentivize businesses to keep their workforces employed throughout the pandemic. Per the CARES Act of 2020 passed by Congress, PPP loans may be forgivable if they meet certain qualifications pertaining to how funds are used. During the first round of PPP, 87% of the PPP loan recipients received $150,000 or less, and those funds supported hundreds of thousands of small businesses. Unfortunately, the PPP expired in August 2020, leaving many of those businesses still struggling.Thankfully, Congress recently passed the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, which includes up to $659 billion in PPP loans to continue supporting small businesses through funds aimed at workforce retention. Many small business owners may be wondering how they can secure a second round of PPP funding and, with nearly a year of PPP data to draw from, the best ways to utilize it. Using insights gathered from the first round of Lantern’s 2020 PPP loan data–including 1,895 PPP applications and 8,826 non-PPP applications–and recent SBA PPP loan data, we’ve broken it all down into nine important things for business owners to know about the PPP in 2021. 

1. The most common uses for PPP were working capital and equipment purchases

With the first round of 2020 PPP loan data in, it’s clear that small business owners had specific needs in mind. Based on data from applicants who specified how they intended to use loans, about 50% of all PPP (and non-PPP) loans were meant for working capital and/or equipment. These findings lead us to believe that small businesses have fairly consistent needs, whether they wanted to apply for a business loan or the PPP specifically. Yet, PPP loan applicants did seek more working capital than non-PPP applicants. That’s understandable since PPP loans are intended to support working capital expenses, like payroll.Applications for working capital and equipment loans through online lenders comparison sites, (like Lantern), may also signify that younger business owners, who might not qualify with a traditional bank, are turning to alternative funding sources. As the second round of PPP loans rolls out, it’s likely you’ll see a continued trend towards working capital to support small businesses that are still trying to maintain their workforces. As the businesses begin to reopen, there may also be a growing need for new employees, equipment, and other working capital expenses to support the increase in business. 

2. There were business sectors that sought PPP loans for reasons other than working capital

While many PPP loan applicants sought working capital loans, there were certain types of businesses that applied for PPP loans to cover other expenses, like expansion and remodeling costs. These businesses included a range of sectors from travel and transportation to mining, utilities, and fitness. Of the applicants that provided loan use info*, the following business types were most likely to seek PPP assistance for things OTHER than working capital:
  • Travel and transportation – These businesses mainly sought PPP loans to cover expansion, refinancing and debt consolidation, and equipment purchases. Since the travel industry has been hit particularly hard during the pandemic, meaning it has less need for labor/payroll funds, it’s likely that these businesses focused on other immediate needs. Hence their desire to consolidate debts or refinance. However, some businesses sought PPP assistance for expansion and equipment purchases, which may indicate that they didn’t anticipate the long-term negative effects from the pandemic.
  • Agriculture, forestry, fishing, and hunting –These types of businesses overwhelmingly sought funds for equipment purchases. One possible reason might be to compensate for the large loss in labor force in this sector caused by COVIDr. In fact, 11% of all COVID cases through July 2020 were in the agriculture, forestry, fishing, and hunting sector, even though the sector makes up only 3% of the U.S. workforce. 
  • Education – These businesses split between equipment purchases, expansion, remodeling existing locations, and marketing/advertising. In fact, of all the business types, education had the greatest percentage of applicants requesting loans for marketing and/or advertising. It’s important to note that public schools were not eligible for PPP funding, which means the PPP applicants were likely private schools or qualifying charter schools that sought to market their institutions to families seeking alternatives to homeschooling during the pandemic. 
The future for travel and transportation is uncertain, as many people are limiting travel at present. However, there are signs that these sectors could bounce back, including a surge in air travel searches following the announcement of a vaccine.As for agriculture, forestry, fishing, and hunting, if companies successfully sought machines to replace COVID-stricken human laborers, the sector may never be the same.Finally, based on the more than 200 million children still affected by school closures around the world, and the PPP loan data, it’s likely that there will still be opportunity for businesses in the education industry well into 2021.*15.1% of PPP loan applicants and 79.4% of non-PPP applicants were able to provide loan use data. 

3. Expansion was still a focus among businesses seeking PPP loans

Despite the economic uncertainty of 2020, nearly 15% of PPP loan applicants still had an optimistic eye on the future and wanted to use the funds for expansion. A number of small businesses in industries like cleaning services, delivery services, grocery, home health, tutoring, and home fitness have seen a surge in sales as people were encouraged to stay home. For small businesses in these sectors, expansion was a necessity to meet the demand for goods and services. With many folks still working and schooling at home, it’s likely these businesses will continue to grow in 2021. 

4. Real estate and construction businesses made up the largest percentage of PPP applicants

Of the loan applicants who provided info about their business type, those in the real estate and construction industries made up about 13% of the PPP applicants. Most requested the loans for equipment purchases, working capital, and expansion.However, depending on their specific type of business, PPP loan recipients planned to use these funds in slightly different ways. Here’s how it broke down. A majority of loan applications intended for:  
  • Working capital requests came primarily from real estate investment companies, which isn’t surprising given the drop in demand for real estate near the beginning of the pandemic. However, demand started to bounce back in the summer of 2020, especially with the historically low mortgage interest rates. However, national housing inventory dropped drastically with a 39.6% decline over the course of 2020
  • Expansion and marketing/advertising asks came primarily from general contractors. Sadly, in April 2020 alone, some 975,000 Americans lost construction related jobs, proving how dramatic an economic slowdown COVID-19 caused. While job loss occurred, it likely left business owners feeling a need to advertise services to keep business moving. 
The housing market is now booming, so real estate businesses can expect to continue their expansion in order to accommodate buyers and sellers. Additionally, stay-at-home orders and more folks working from home will likely keep the demand for home maintenance and repair services high, keeping equipment purchases still valuable for small businesses offering home services. 

5. Information and media businesses used PPP funds to keep up with growing demand for objective news during COVID-19

Of all the types of  business, information and media had the largest percentage of applicants seeking funds for expansion. There could be a few reasons for this, including:
  • An increase in people’s desire to receive reputable news about the pandemic and other global issues, which is also suggested by increases in the number of those who pay for their news. This includes a 20% increase in the U.S. and a 42% increase in Norway for paid news services online.  
  • A “60% increase in the amount of video content watched globally,” likely due to the number of people at home, according to Nielson
With the pandemic still looming over much of the globe and a constant cycle of news and updates related to world events on tap 24/7, it’s likely that consumer demand for news and media will continue to grow over the next year. That could make expansion a wise investment for small businesses in this sector. 

6. Despite the increased need for medical care, healthcare businesses suffered job loss and economic uncertainty

The beginning of the pandemic saw a sharp decrease in healthcare revenue and the loss of more than 1.5 million healthcare jobs. This drop was likely the result of employees who were concerned about contracting the virus, or fewer people seeking healthcare services out of fear of COVID-19. Thankfully, there was an uptick in employment in May 2020, probably due to the reopening of medical services like dentistry. Of those companies that provided their business type, healthcare made up 5% of PPP applicants. With an increase in employment and COVID-19 cases, It’s understandable why healthcare businesses needed working capital to maintain their workforces and cover everyday expenses. Expansion was the next most common loan use, which may have been caused by the need for healthcare services to expand in response to the pandemic. Healthcare businesses include more than just hospitals and general practitioners, like dental care, mental healthcare, and alternative care like chiropractic. As the vaccine rollout continues, more healthcare businesses will be able to see patients and clients, which may necessitate more funding to support reopening. One of the biggest opportunities for growth could be in telehealth, which has already grown considerably in the past few years, with 95% of large US employers reporting that they cover telehealth, up from 56% in 2016. Virtual healthcare could be crucial as countries around the world look to slow the spread of COVID-19 by limiting in-person visits.Additionally, mental healthcare is likely to see an increase as people report feeling more anxiety and depression due to the pandemic. The Centers for Disease Control and Prevention report that in June 2020, “The prevalence of symptoms of anxiety disorder was approximately three times those reported in the second quarter of 2019 (25.5% versus 8.1%).” Considering the increased need for various healthcare services, healthcare businesses may want to invest in equipment, technology, and labor that supports their response to the ongoing COVID-19 crisis. 

7. More than 30% of PPP applications came from California, but businesses in that state received only about 12% of the total PPP loans that were granted

It’s not surprising that the most populous state in the nation would make up such a large percentage of PPP applicants. But of the total number of PPP loans approved, California only received 12%, which worked out to about 13% of the total funding in dollars. While the total number of loans received was high in California, when broken down to SBA loan dollars per capita, California ranked near the bottom at $845 per capita, with small states like North Dakota receiving $2,037 per capita. One reason for this interesting statistic could be that smaller banks were able to process loans more quickly than larger financial institutions. In states like North Dakota and Wyoming, which saw a larger share of the PPP funds per capita, small businesses may have relied on the relationships they had with smaller community banks; whereas those in more populous regions, like California and New York, were competing with far more businesses and often relying on larger financial institutions, which may have focused on high-priority applicants.  For small business owners in populous regions, this PPP loan data is vital information, particularly if you’re considering applying for the PPP in 2021. It may be helpful to turn towards smaller financial institutions when applying as they may be able to process loans more quickly, thus ensuring you receive necessary funding.  

8. The average requested PPP loan amount was under $100k

According to Lantern’s data, the average requested loan amount was $99,839 and the SBA report reported an average PPP loan amount of $101,000.  The question remains: should small business owners apply for Second Draw PPP Loans, knowing that they can only take out 2.5 times their average monthly payroll from 2019 or 2020, with a cap of $2 million? Will that money last until states reopen?It’s a difficult question without clear answers for many small business owners. They know they may be taking a risk. Many are hopeful that, as vaccinations increase and the summer months begin, they’ll be able to survive.With so many unknowns, Second Draw PPP Loan applicants should carefully consider their needs and how much money they need to last at least a few more months. It’s also important to remember that PPP loans are forgivable when used towards payroll, rent, mortgage, and utilities. However, they do need to be repaid if they’ve been applied to other expenses. For small businesses spending PPP money elsewhere, it’s crucial that they weigh the cost of incurring that debt later down the road. 

9. More than one-third of PPP applicants did not have a good credit rating

While the SBA didn’t set a minimum credit score for PPP loan applicants, some lenders still set their own credit requirements, and according to Equifax, 670 is the minimum credit score for “good” creditConsidering this and Lantern’s PPP loan data, which showed that 35% of applicants had a score below 660, it’s understandable why people with lower credit scores sought PPP loans through online lenders, as they typically have more lenient requirements.  SBA-approved lenders still had a responsibility to do due diligence to make sure PPP loan applicants were capable of paying back their loans if they didn’t use the funds toward forgivable expenses. Since SBA lenders operate under the SBA 7(a) loan requirements, which includes a credit check based on the FICO SBSS score, some lenders may have simply continued using that requirement when processing PPP loan applications. Small business owners should keep this in mind if they’re applying for business loans at banks. They can ask whether or not lenders have credit requirements and what those might be before applying. They may also consider online lenders with different criteria if they feel that their credit scores could affect their ability to obtain a PPP loan. 

Funding for Your Business in 2021 and Beyond

These are challenging times for small business owners, but Lantern Credit is here to help. Our mission is to make small business financing simple, whether you’re applying for the PPP, need a long-term business loan, a line of credit, or a short-term loan. In just minutes, you can compare reputable lenders and get access to the capital you need in as little as 24 hours. Get started by learning about our small business loan options today!


To provide valuable insights about PPP loan data, we reviewed three major datasets:
  • Proprietary data from Lantern's 2020 PPP application
  • Proprietary data from Lantern's non-PPP applications in 2020 
  • The SBA's latest report on dispersed PPP funds (through August 2020) 
By analyzing this data, we sought to understand how small businesses intended to use PPP funds and how the funds were actually used (dispersed) after the application period. We’re hoping these insights will help small business owners make informed decisions about applying for financing in the future and feel empowered to continue investing in their dreams.

About the Author



Lantern is a product comparison site that makes it easy for individuals to shop for products and compare offers with top lenders. Lantern is owned and operated by SoFi Lending Corp., the digital personal finance company that has helped over one million people get their money right.
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