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how they are supposed to work is that the loan is provided to the company under certain conditions and some of those conditions include directions on how the money needs to be spent. Repayment terms provide enough runway to give companies time to recover and pay back the loans.
How they actually work is that these companies lobby Congress and often have very lax oversight. At best, loans received by the government are often risk free and allows a company to spend money they otherwise not have. For example, they might have to pay a CEO their bonus.
The only oversight is the American public and we just don't have the balls anymore to do what we have done historically to enforce a broken social contract.