Peter Menzies got two coronavirus relief loans last month: one for a bookstore and the other for a restaurant. Now he’s returning the latter, the biggest by far at $125,000.

It’s not that he doesn’t need federal aid for his Reading Room restaurant in the hamlet of Katonah, New York, about 40 miles (64 kilometers) north of Manhattan. Capacity limits mean he will lose too much money to justify reopening and rehiring 20 workers now. And the rules to turn the loan into a grant are so restrictive that when the period for using the funding ends on June 11, the place would probably have to close again anyway, he said.

“We were essentially just going to rehire people, ask them to go off of unemployment, take lower wages, and then not really work or only work in a very limited capacity,” Menzies said.

Menzies’s conundrum helps explain why, after a mad dash for funding last month, the $669 billion centerpiece program to keep the 30 million U.S. small businesses afloat during the crippling pandemic has abruptly slowed. Created at the end of March as a stopgap to keep workers employed for eight weeks during a self-induced coma of the economy, the program known as PPP is about to outlive its own purpose. Efforts are underway in Congress to loosen the rules and accommodate the needs of businesses today.

It’s a critical time for the rescue effort, as large swaths of the country are reopening and many stores won’t get more leniency from their landlords. While almost 4.5 million firms have been approved for loans, the pace of new approvals has sharply dropped this month.

And Friday starts the period when firms that got funding when the program launched on April 3 can start applying to have their loans forgiven in a complicated process that lenders and small-business advocates want to see simplified.

“We’re stalled because it needs a refresh and it needs to reflect what’s needed for small businesses on the ground in order to survive to the other side of this crisis,” said Karen Kerrigan, president and chief executive officer of the Small Business & Entrepreneurship Council.

At least $20 billion in PPP loans have been canceled, according to calculations by Bloomberg News using data released by the Small Business Administration. The net amount of approvals was $510.5 billion on Thursday, about $2.7 billion less than through May 16 -- even as the net number of loans increased by more than 119,000 during that time, according to SBA reports.

The SBA and Treasury Department, which are in charge of the program, haven’t provided a comprehensive accounting of cancellations, which include duplicate loans. Some of the returns are from larger publicly traded companies that sent back hundreds of millions of dollars following outrage over their getting aid at the expense of mom-and-pop stores and the prospect of an audit of all loans of more than $2 million.

But small-business advocates estimate the bulk of the cancellations are from companies returning their loans because they’re not sure they can spend the funds in the eight-week forgiveness period, are unsure about the rules, or are concerned about an audit.

An SBA spokesman declined to comment.

Even as the economic damage from the pandemic continues to hit hard across the U.S., executives at the largest U.S. banks, speaking on the condition of anonymity, said that they don’t foresee demand for loans picking up again without major changes to the program.

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