Many left desperate as SBA refuses further applications for aid
Mark Niquette and Jennifer Jacobs, Bloomberg News
The U.S. Small Business Administration said it has stopped accepting applications for two programs meant to help small firms survive the coronavirus outbreak after funding ran out, leaving many worried about getting desperately needed aid.
Funds for the $349 billion Paycheck Protection Program, or PPP, to keep workers on payrolls have been exhausted, the SBA said on Thursday. And money also has lapsed for the Economic Injury Disaster Loan program, or EIDL, offering government loans and emergency grants of as much as $10,000.
"These two loan programs are essential, and neither one is operational now," said Holly Wade, director of research and policy analysis for the National Federation of Independent Business, the largest group representing small businesses in the country. "It's absolutely terrible for the small business sector."
Congress is debating adding an additional $250 billion to PPP, and small business advocates are calling on lawmakers to add more money for the disaster loan program as well. About 100 members of Congress signed a letter Thursday to SBA Administrator Jovita Carranza with concerns about the EIDL program, saying they would strongly back a request for more funding. House Minority Leader Kevin McCarthy told reporters he supports adding money to the program, and a Senate Democratic bill floated last week included money for it.
Without more money for the PPP program, many small firms that have flooded banks with applications won't get help because the government-backed loans were available on a first-come, first-served basis, and after just two weeks there's no money left for the SBA to guarantee additional loans, officials said.
Brad Close, president of the National Federation of Independent Business, the largest group representing small businesses in the country, said its members' worst fears just came true.
"America's small businesses are on the brink, trying desperately to keep their doors open and support their employees," Close said in a statement. "They have been let down by lawmakers and the bureaucracy, with the smallest businesses most disadvantaged in attempting to participate in the Paycheck Protection Program."
Small businesses are continuing to seek loans and existing applications are still pending SBA approval, and Congress needs to act, Consumer Bankers Association President and Chief Executive Officer Richard Hunt said.
"The millions of men and women who work at America's small businesses and their families are battling a health crisis while also facing an economic crisis unless Congress authorizes additional funds for this program," Hunt said in a statement.
Wells Fargo & Co., which was the No. 3 SBA-approved lender by volume last year, said it will continue accepting new applications so it will be ready to proceed if and when Congress adds funds to the program. The firm said Tuesday it hadn't funded loans anywhere close to the $9.3 billion in loans that JPMorgan Chase & Co. said Tuesday it had.
Because banks make the PPP loans, not the SBA, the fund isn't technically "out of money" but rather the agency has guaranteed $339 billion to be disbursed, Celtic Bank spokeswoman Linda Howell said. The bank is concerned about "authorization hoarding" by lenders that potentially can't fund the loans, Howell said. Celtic Bank has disbursed $50 million as of Thursday morning with an additional $93 million in loans that have been authorized and are being processed, she said.
The SBA said on its website that while it unable to accept new applications for the EIDL loans and emergency grants without more funding, firms that had already submitted their applications will continue to be processed on a first-come, first-served basis.
But small business owners have complained about waiting weeks for answers and funding, and some are getting less than they expected because of the demand. The NFIB said a survey of its members released April 9 found only 4 percent had been approved and no business owner had received a loan or grant. The SBA has not disclosed how many applications have been approved and funded.
As of Thursday morning, the SBA reported there had been more than 1.6 million applications for PPP loans approved for about $339 billion. That amount is the value of loans approved for lenders to disburse, not money that has reached borrowers. Comprehensive data on how much money has actually been handed out isn't available, but lenders report that disbursements are being made. The program launched April 3.
Loan approvals had to stop short of the $349 billion total funded by Congress because about $10 billion is needed to cover fees and processing, Republican Sen. Marco Rubio of Florida said in a tweet.
U.S. Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza called on Congress to approve more money for the program Wednesday in a joint statement saying it's "saving millions of jobs" and helping small firms survive the pandemic.
Republicans sought to approve an additional $250 billion for the program last week, but the effort stalled with Democrats also wanting changes and more aid for other groups. Senate Democratic Leader Chuck Schumer and Mnuchin talked Wednesday as negotiations continue. Senate Majority Leader Mitch McConnell and House Republican Leader Kevin McCarthy accused Democrats in a joint statement on Wednesday of blocking emergency aid and treating a bipartisan program "like a Republican priority which they need to be goaded" into backing.
House Speaker Nancy Pelosi said Democrats are pushing for changes that will allow help for small businesses that have been shut out of the program because they don't have access to a lender, as well as provide more funding for "desperate" state and local governments and hospitals.
The PPP, which was enacted last month as part of a $2.2 trillion relief package in response to the outbreak, offers loans of as much as $10 million. The loans convert to grants if proceeds are used to keep workers on the payroll and cover rent and other approved expenses for about two months, a short-term stopgap designed to help businesses get by until the economy reopens.
Mark Niquette and Jennifer Jacobs