Once beset by a flood of complaints, balky computer systems, changed rules and frantic calls to the Treasury Department, the federal government’s small-business Paycheck Protection Program is suddenly looking like a measured success.

The U.S. economy buckled in March and April amid the coronavirus pandemic, but it appeared to regain some of its footing in May, adding 2.5 million jobs. The economy remains extremely weak, with a high unemployment rate and a surge in Americans seeking assistance. Many economists say conditions will remain shaky for at least another year.

But they also say things would be even worse without the giant loan forgiveness program, which Sen. Marco Rubio (R-Fla.) shepherded through Congress and then helped defend during chaotic weeks of implementation.

Getting to this point strained the government, the banking industry and small businesses, with many missteps and pivots along the way as they tried to build a program from scratch. And the Trump administration vacillated wildly between trying to rush money out the door and then trying to tighten rules, enraging lawmakers such as Rubio, confusing borrowers and nearly overwhelming banks, even those with small-business expertise.

“It was like saying, ‘I want my locally owned farmers market to work like Walmart or Amazon,’ ” said Alicia Wade of Oklahoma City’s Valliance Bank, which processed 178 loans the first weekend the fund opened. “It’s not feasible.”

A rocky start

Confusion engulfed the program from the outset.

One week before the program began, a bank lobbyist group wrote to the Treasury Department warning of a major flaw.

Treasury was not planning to waive strict criminal penalties for lenders who did not thoroughly vet their new customers. The banking group warned that leaving the rules in place would require a level of vetting they couldn’t quickly provide.

“As currently envisioned, Cares Act funding will only be provided to banks’ current legal entity customers,” stated the letter, which was obtained by The Washington Post. The PPP was established as part of the $2 trillion Coronavirus Aid, Relief and Economic Security (Cares) Act.

When the PPP began accepting applications on April 3, the bank lobbyists’ prediction proved true. Rather than covering all businesses that qualified, much of the funding went first to the customers the banks already knew and trusted ― including large corporations ― igniting a public firestorm that outraged tens of thousands of business owners still desperately awaiting funding.

This created a logistical and public relations nightmare, with many smaller companies sidelined while larger firms found easy access to the money. Treasury had to make repeated changes to the program and eventually ask Congress for more money before many of the problems were ironed out.

Two months later, the PPP has directed more than $530 billion to 4.5 million companies, and economists, business leaders, White House officials and lawmakers from both parties think it helped stabilize the economy. Because the government has released no detailed information about how many jobs the program has saved, it’s still unclear whether it achieved its primary goal of apportioning the lion’s share of the money to workers.

The program is about to enter a new stage, as many of the companies that received loans will begin applying for loan forgiveness to determine whether they have to repay the money. The program will also face its first congressional hearing on Wednesday, when Rubio will call Treasury Secretary Steven Mnuchin, who had appeared skeptical about creating the program while the legislation was being drafted, and Small Business Association head Jovita Carranza to testify.

Rubio said in an interview that part of his inquiry will focus on “some early regulatory decisions, made or not made, that could have provided a little bit of clarity on the front end and sort of prevented some of the issues that happened.”

'If I had a time machine … '

Many of the Paycheck Protection Program’s initial problems can be traced to its hurried creation in the frenzied days and nights of negotiation that led to the passage of the Cares Act, which was rushed together at breakneck speed to arrest the economy’s sudden free-fall.

Congress created the program in March with very loose restrictions, an attempt to give the Trump administration flexibility to spray billions of dollars across the economy as quickly as possible to try to contain a tidal wave of layoffs.

The Small Business Administration, the government’s smallest Cabinet-level agency, didn’t post the rules for the program until the night before it went live, a day when 1,363 people died of covid-19 and the numbers were on the rise. At agency headquarters on launch day, the SBA’s software for processing applications repeatedly malfunctioned, creating a massive backlog. Large banks, leery of inadvertently misusing taxpayer money, waited for more clarity from the government before they started lending. Community bankers asked staff members to work overtime, but even the most successful ones say it was nowhere near enough.

Although the program was designed so companies with 500 or fewer employees could tap up to $10 million in forgivable loans, it was soon clear much bigger companies could access the program, as large chains including Ruth’s Chris Steak House began announcing in securities filings that they had received millions in funding.

As one report after another came out about large, public firms getting money, the National Federation of Independent Business asked policymakers to “put an immediate halt to this nonsense.”

“Publicly traded companies did not access this money on their own,” the group said April 27. “The legislation lacked strong guardrails, leaving an opening for big business, and allowing large financial institutions to help their bigger clients access money intended for real small businesses.”

Facing public backlash about concerns that large companies were taking taxpayer money, Mnuchin urged well-capitalized businesses to return the money they had received and said all loans over $2 million would be audited.

The administration was also forced to ask Congress for more money, and lawmakers agreed to an additional $310 billion in April as part of a larger bill that tried to ensure more of the money went to minority-owned businesses and underserved communities.

Rubio and Sen. Ben Cardin (D-Md.), two sponsors of the program, say there are things they would have done differently. Although the first $349 billion allocated was more than initial drafts of the legislation called for, Rubio said that in retrospect, it’s clear the program should have been funded at a higher level to begin with. That first pool of money was gone after just 13 days, leaving thousands of small-business owners struggling and furious with policymakers. More than 100,000 small businesses have closed permanently since the start of the pandemic.

Cardin said Congress’s intent was for large chains to be able to get only one loan totaling $10 million, not multiple loans exceeding that amount, as happened in a some instances.

Rubio said, in hindsight, Congress should have given the administration more direct instructions, including the percentage of the loan that had to go to payroll.

“If I had a time machine and could have seen everything that happened, we probably would have been more specific, and some of the things that there was regulatory uncertainty about, that ultimately we had to wait for guidance from Treasury to write rules about, I think in hindsight, we probably would have been more specific about,” he said.

The dash for cash

After starting with too little money, the PPP now appears to have too much, as more than $130 billion has gone unspent for more than a month. The slowdown in borrowing required additional changes to loosen the rules. Last week, President Trump signed into law a new piece of legislation that extends the amount of time companies have to use the loans and have them forgiven from eight weeks to 24 weeks, and could cause demand for the program to pick back up.

When the program began, the nation’s tourism and entertainment sectors had been mostly shut down for three weeks, as sports arenas, museums and concert venues had closed en masse in mid-March.

Small-business owners logged into their banks’ websites from the backs of their darkened restaurants and the empty lobbies of their hotels. Many of them had no income. Some had sent their employees home, unable to pay them any longer.

“We started seeing massive cancellations coming in,” said Katen Patel, who owns an Econo Lodge, Best Western and other hotels in Oregon. He laid off 70 percent of his staff, who became part of about 4 million hospitality workers in the country who lost their jobs.

In the six days between the signing of the $2 trillion Cares Act and the morning that lending began, Small Business Administration leaders asked Robert Scott, Great Lakes regional administrator, to come to Washington to serve as director of a “war room” overseeing the rollout.

The SBA is used to providing aid to businesses after localized natural disasters such as tornadoes and hurricanes. The cross-country scale of the coronavirus crisis was an entirely different sort of disaster.

For several nights as the program got underway, Scott said he and colleagues, including Carranza, an SBA veteran and former UPS executive, stayed in the office until 3 or 4 a.m., eating food they ordered from Costco.

The plan was to cede much of the underwriting and approval process to banks, which would accept applications from their customers and then forward qualifying borrowers to SBA for processing. The agency’s E-Tran software was supposed to quickly vet the applications for duplicates or overdue SBA debts, then approve them.

When the system is working, said Steve Bulger, administrator of the SBA’s Atlantic Region and acting administrator for its Mid-Atlantic Region, “it’s a matter of a few seconds and ‘boom,’ that application goes back out.”

But the rollout was anything but smooth. Headquarters staff members, led by a crew of 10 to 15 socially distanced officials on the seventh floor of the agency’s Washington headquarters, didn’t finish the rules until the night before the program’s launch, sending details to the public at 6:40 p.m. Thursday.

The delay prompted many big banks not to accept applications for hours the next morning, even as their customers rushed to get to the front of the line for money they’d been told was to be given on a first-come, first-served basis.

In district SBA offices nationwide, the normal call volume quickly quadrupled. C.J. Castro, who runs the SBA office in Tampa, said even his cellphone “started ringing at 7 in the morning and it didn’t stop till 10 o’clock at night” for weeks afterward.

“When you hear folks on the other line in tears, and they don’t know where to go, it leaves an impression,” Castro said.

Desperate pleas for help

E-Tran, which normally vets loans from about 1,700 agency-approved lenders, was suddenly being asked to vet loans from close to 5,000 lenders (more than 5,400 are currently approved). Banks nationwide complained that E-Tran kept crashing, preventing all of the newly registered lenders from entering applicants into the government system for final approval.

After a long wait, some business owners got frustrated and applied with a smaller lender, only to be told by E-Tran that they were already in the system with an approved loan from the original bank, which hadn’t yet told them or disbursed the money, Castro said.

Eric Terrell, senior manager at the SBA office in Memphis, started getting 120 calls a day, many from panicked entrepreneurs who hadn’t heard from their banks after applying.

“You get phone calls from business owners who are crying, all the savings they had have run out,” Terrell said. “You get other people, they’re so upset they use profanity. And I understand."

By April 16, the first $349 billion was gone. For the SBA, it was a pace many times greater than it usually operated. In a typical year, the agency approves $25 billion in such loans; since April 3, it has approved about $530 billion.

Within days of the fund running dry, another problem emerged, as dozens of publicly traded companies reported receiving money. AutoNation, a Fortune 500 network of car dealerships, applied for dozens of loans from its Florida headquarters and received at least $77 million. Ashford Group, a Dallas-based owner of 130 hotels, received at least $76 million.

It remains unclear how many large hotel and restaurant chains may have taken advantage of the program, but publicly traded firms in all received more than $1 billion in funding. The government has largely refused to disclose any beneficiaries of the program and has not said how much has been returned.

In an interview, Carranza acknowledged the frustration from Rubio and Cardin with getting data about the performance of the program, but said the priority had been getting money out the door to businesses.

“Senator Rubio and Senator Cardin wanted those funds in the hands of small businesses rapidly. And so that was my focus,” Carranza said, adding data integrity was also important and she tried to provide information to the Small Business Committee as fast as possible. “We’ve been providing data. At this point, it’s not sufficient enough. However, we’re working very closely with [Rubio’s] office to help them realize exactly what the performance level is.”

After the outcry, it fell to Treasury officials to resolve the problem.

Lawmakers had initially planned to approve even less money for the program, with early drafts calling for $100 billion, according to three people aware of internal discussions who spoke on the condition of anonymity to share details of the private negotiations.

Mnuchin appeared either lukewarm or skeptical about the effort and was more focused on the loan programs for airlines and large corporations during the drafting of the legislation, two of these people said. Publicly, Mnuchin has heralded the program as a successful answer to the nation’s greatest downturn since the Great Depression.

After the problems began to arise, the Treasury Department issued a stream of changing and sometimes confusing new rules.

Constant pressure, constant changes

Mnuchin was under constant pressure from Capitol Hill to make changes. Sen. Susan Collins (R-Maine) has complained to him in private phone calls about Treasury’s changing guidance on how firms who participated in the program would be audited, said two people aware of the conversations who spoke on the condition of anonymity to share private conversations. A Collins spokeswoman on Tuesday said the senator was concerned Treasury’s changing guidance could scare businesses away from applying for PPP.

The inadequate size of the funding created further problems. Fearful that the money would run out quickly, the administration had created a new requirement ― one not specified in the legislation Congress approved ― stipulating that firms could receive loan forgiveness only if 75 percent of the aid went to maintaining payrolls at precrisis levels. The rest had to be spent on utilities, rent or mortgage interest. (Last week, this rule was changed and the new ratio is 60/40.)

That meant many firms could not take the loans with confidence that they would be forgiven. Restaurants that were still open for takeout and delivery needed cash to pay food suppliers, but realized if they used PPP money for those expenses, they would be forced to pay that portion back, without knowing when they could return to business as usual. And with their businesses closed for sit-down service, they didn’t need 100 percent of their staff back on the payroll, restaurateurs said.

Lobbyists for the restaurants immediately took their complaints to the White House and the Treasury Department, but without success. Now, about one third of food service and accommodation businesses have less than one month of cash left, said Adam Ozimek, chief economist at Upwork, putting as many as 3 million restaurant jobs at risk.

“It was frankly inexplicable, that they’d take that approach because it directly contradicts the program’s intended flexibility,” said John Lettieri, president and chief executive of the Economic Innovation Group, a nonpartisan public policy organization. “It works better for least-affected employers and worse for the most affected, which is perverse.”

Some who were skeptical of the program early on have changed their tune. Despite criticizing the way public companies tapped into it, NFIB considers the program a “qualified success,” said Kevin Kuhlman, the group’s vice president of federal government relations. He said a recent NFIB survey found 77 percent of small businesses had applied for loans under the program, and 93 percent had been approved.

Wade, the Oklahoma City banker, said her staff worked 14-hour days when PPP began. She said she was hoarse by the end of the first week, after going through applications with carpenters, contractors, restaurant owners and dozens of others.

All in all, she said, “I believe the program has worked, regardless of its ease of use."

Clarification: An earlier version of this story described the Payment Protection Program as a “corporate loan forgiveness program,” which may have given an inaccurate impression of the program’s focus on small businesses. This version has been updated. The story has also been updated to clarify concerns raised by Sen. Susan Collins (R-Maine).