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Why did some companies repay PPP loans that could have been forgiven?


Let's say you got a loan and you didn't have to pay it back. You'd probably celebrate. But some people did something unusual. They got loans from the government's Paycheck Protection Program, which helped small businesses during COVID, and they were eligible for loan forgiveness, but they repaid the money anyway. NPR's Sacha Pfeiffer is here with us to tell us more about this. Good morning, Sacha.

SACHA PFEIFFER, BYLINE: Good morning, Michel.

MARTIN: So why would companies repay loans that could have been forgiven?

PFEIFFER: Yeah. So first, understand that forgiveness was the norm with PPP loans. Even though this program was rampant with fraud and waste, the vast majority of the loans have been forgiven. So I was surprised to find that some borrowers have repaid their loans without ever applying for forgiveness, yet they would have qualified for forgiveness according to the program's rules. Out of the 11 1/2 million loans issued, only about 73,000 have been repaid without requesting forgiveness, just six-tenths of a percent. Companies don't have to explain why they repaid it, but one business I interviewed said it ended up being able to survive the pandemic without using its PPP loan, so it thought paying it back was the right thing to do.

MARTIN: So they say it was the principle of the thing. It was a sense of ethics.

PFEIFFER: That's what they say. This is a law firm in Wellesley, Mass., called Gilmore Rees & Carlson. It got a $700,000 PPP loan. And here's what its managing partner during COVID, Bob Morrill, told me.

BOB MORRILL: From the second we got the money, the plan was always, we're going to wait and see if we need it, and if we need it, we're going to use it. And if we don't use it, we're going to pay it back. The analogy that comes to mind to me is like you're throwing life preservers to people on a boat in a storm, and if they don't need it, when the boat pulls back into the harbor, they ought to give the life preservers back.

PFEIFFER: And Michel, to continue that analogy, his law firm got through the COVID storm better than expected - no layoffs, no pay cuts - so it paid its loan back. And Morrill wishes the government had appealed to companies to return money they didn't need.

MORRILL: The people at the higher-wealth end of the spectrum that kept it, that didn't need it - yeah, I got a problem with that.

MARTIN: Now, Sacha, you've reported before that the Paycheck Protection Program distributed almost $800 billion. How much of that was forgiven?

PFEIFFER: Almost all of it - 96%. Even loans that went to companies owned by rich celebrities, including Khloe Kardashian and Tom Brady, were forgiven, and even loans to companies that thrived during COVID, like many construction and teleworking software firms. Of the companies that returned the money without requesting forgiveness, most of the ones I contacted wouldn't talk, so it's unclear how many others did that as a kind of ethical decision.

MARTIN: I wonder why they wouldn't talk about it. And I'm also wondering what other reasons might there be?

PFEIFFER: Yeah, I know. It's strange, isn't it? So maybe they thought repaying would be easier than applying for forgiveness. Or maybe they thought they didn't meet forgiveness criteria, or they didn't want to risk a government audit. And, Michel, some were big companies that got slammed for taking PPP and were pressured to return it like Shake Shack and the LA Lakers.

MARTIN: So for the people who did return the money, they told you they did it for their own reasons but that they also hope it would set an example.

PFEIFFER: You know, all those forgiven loans have contributed to our $34 trillion national debt. And the attorney I interviewed, Bob Morrill, says his law firm returning the money is its tiny contribution to not making that debt any larger. Here's what a University of Chicago finance professor who studies PPP, Eric Zwick, said to me about that.

ERIC ZWICK: It's like the kid throwing the starfish back into the ocean after the storm.

PFEIFFER: I didn't know that parable, so Zwick told me it's about a bunch of starfish getting washed ashore, and a child starts putting some back in the water, and someone approaches the child.

ZWICK: The person's like, you can't possibly save them all. Why are you doing this? And he's like, well, it makes a difference for this one as he throws one into the water.

PFEIFFER: The lesson being just because an action is small doesn't mean it isn't worthwhile.

MARTIN: That is NPR's Sacha Pfeiffer. Sacha, thank you.

PFEIFFER: You're welcome. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Michel Martin is the weekend host of All Things Considered, where she draws on her deep reporting and interviewing experience to dig in to the week's news. Outside the studio, she has also hosted "Michel Martin: Going There," an ambitious live event series in collaboration with Member Stations.
Sacha Pfeiffer is a correspondent for NPR's Investigations team and an occasional guest host for some of NPR's national shows.