These tech startups received PPP bailout loans but still laid off employees

The Paycheck Protection Program (PPP) was established by the government to incentivize small businesses to keep their workers employed during the pandemic. However, a analysis reveals that over 100 tech startups conducted layoffs despite receiving loans through the program.

On Monday, the government released the names of all companies that received loans greater than $150,000. Among the tech startups on the list: Getaround (laid off 100 on 3/27, received $5-10 mm loan on 4/28), Metromile (laid off 100 on 4/6, received $5-10 mm loan on 4/7), Lever (laid off 86 on 4/8, received $2-5 mm loan on 4/27), and Mixpanel (received $5-10 mm loan on 4/13, laid off 65 on 5/12).

Some companies have disputed the list’s accuracy, claiming they never received a PPP loan. It’s also worth noting that most of these companies laid off employees before getting the loan.

PPP loans carry a 1% interest rate and a 2 or 5-year term, making them an extremely attractive financing option for startups. The loan can even be forgiven if the company uses at least 60% for payroll costs and doesn’t reduce headcount, among other requirements.

Here’s a list of startups that reportedly received a PPP loan and laid off employees during the pandemic (our Tracker has a complete list of all tech layoffs).

Many venture-backed startups struggled to decide whether to apply for a PPP loan, fearing they’d be taking money that could’ve gone to needier small businesses. Those that received a loan and laid off employees may endure additional scrutiny since the loan didn’t accomplish its intended purpose.

At the same time, PPP loans may have prevented these startups from laying off even more staff or shutting down altogether. 72% of the companies listed above conducted their layoff before receiving the loan, suggesting that the money was used to avoid further business damage.

While companies must retain their employees to qualify for loan forgiveness, there’s no such requirement to take out a PPP loan in the first place. Businesses are also allowed to use the loans for expenses beyond payroll.

Thanks to intern Stephan Billingslea for helping with the research.