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Some small-business owners say the Paycheck Protection Program could leave them worse off than before the pandemic

- Devin Leonard With Mark Niquette and Mike Sasso

IF ANYONE HAD MASTERED THE ART OF RUNNING BOOKSTORES in the Amazon age, it was Sarah McNally. Her flagship McNally Jackson shop in SoHo and a second location in Williamsburg, Brooklyn, were filled on evenings and weekends with customers who appreciated her carefully chosen titles. Recently, she’d doubled the size of her company, opening two additional stores—just in time for the coronavirus pandemic. “It was terrible timing,” she says in early April.

McNally tried to figure out how to keep her shops open. Maybe people could still pick up preordered books? But on March 15, workers who were part of the union representing most of her 115 employees staged a sickout and petitioned her to close the stores for safety reasons. She furloughed all but 20 workers with a week’s pay and shifted her business online. On Twitter, some customers vowed never to patronize the stores again; McNally, however, felt she had little choice if her company was to survive. It didn’t matter to detractors that she promised to pay health insurance through May and, depending on revenue, until the end of June.

Like almost every other small-business owner in the U.S., McNally read less than two weeks later about the passage of the $2.2 trillion Cares Act. It provided $349 billion in loans (at 1% interest) for small businesses through the new Paycheck Protection Program, which the Small Business Administration would oversee. The Department of the Treasury and the SBA promised that PPP loans would be forgiven as long as borrowers spent 75% on payroll within eight weeks of getting the money.