Take Tim Smith, 60, who owns vinyl-record store Papa Jazz in Columbia, South Carolina. He got a $26,600 PPP loan to help when business dropped as much as 65% at the peak of the crisis, but still had to dock his own salary to keep going. Or Dena Paolino, 55, the owner of an all-female boxing gym, Striking Beauties, in North Attleborough, Massachusetts, who couldn’t get a PPP loan and has used her personal stimulus check to keep her business afloat.

After using almost all the money they got through the PPP to keep their staff on payroll, Darlene and Mike Moore closed their southern-style restaurant in downtown Asheville, North Carolina, in mid-September, just under three years after opening.

“We knew we weren’t going to be able to sustain ourselves,” Darlene, 41 and a mother of two, said. “It became too much to endure.”

The PPP, part of an unprecedented stimulus package passed by Congress in March in response to the pandemic, was always meant as a short-term stopgap for firms with fewer than 500 employees, primarily to keep workers employed. After a rocky start, the PPP reached hundreds of thousands of truly small companies by the time it closed to new applications on Aug. 8. But many more were left behind, rejected by lenders or daunted by burdensome and often confusing rules to get the loans converted into grants.

Even if lawmakers extend the expired PPP to allow recipients to get a second loan, it won’t be enough to help those who never got one in the first place, said advocacy group Small Business Majority.

Tim Smith, owner of the Papa Jazz record store in Columbia, South Carolina. Photographer: Micah Green/Bloomberg
‘Bizarre Economy’
By contrast, the Fed’s action benefited all types of borrowers, as long as they were big enough to issue bonds.

One of the peculiarities of the Covid-19 crisis is the divide created between bigger and smaller firms, said Robert Bartlett, a professor of law and faculty co-director of the Berkeley Center for Law and Business. The Fed’s effort to add liquidity to the system allowed both investment-grade and junk-rated companies to access financing, while smaller firms were left with tighter credit markets, he said.

“It’s all part of this bizarre economy,” Bartlett said. “For some people, it’s record-setting highs, but desperation for others.”

The Fed announced its plan to directly purchase corporate bonds in late March, and expanded it to include some junk-rated debt in early April. The mere announcements sparked a rally so broad that junk-rated borrowers were able to hit the market before the Fed had bought a single corporate bond.

Among them was SeaWorld, which was already troubled before the pandemic forced it to temporarily close all of its 12 parks. About a month after the Fed’s announcement the Orlando-based company had sold  $227.5 million of bonds.

In July, SeaWorld made another trip to the bond market, announcing its offer on the same day it disclosed a 96% drop in second-quarter preliminary revenue compared with a year earlier. The bond attracted so much demand that the deal was increased by $100 million to $500 million.

“The pandemic has unquestionably affected businesses of all sizes in the travel, tourism, hospitality and entertainment industries including SeaWorld,’’ the company said in an emailed statement. “We have made difficult but necessary decisions to shore up our balance sheet using available resources to put the company in the best possible position to continue to contribute to our nation’s recovery.”

But the booming debt market also bolstered the fortunes of businesses that got a boost from the pandemic.