As businesses across the country look to Washington’s recently passed legislation for help and guidance through the coronavirus pandemic, newly implemented relief measures are hitting roadblocks.
At $2.2 trillion, The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law at the end of March, is the largest economic rescue package to be passed in U.S. history.
The legislation features two aid programs designed to help small-to-medium size businesses under 500 employees.
The Paycheck Protection Program (PPP), endowed with $349 billion in federal funding, provides businesses with short-term loans to help keep their staff on payroll, help pay rent, mortgages and utilities, or help pay off interest on debt. Businesses can borrow up to two-months-worth of capital for those costs, and should they spend the money as it’s intended, the loans will be forgiven.
The Economic Injury Disaster Loan (EIDL) is a preexisting loan option run by the Small Business Administration (SBA), which provides disaster relief funding to embattled businesses. The CARES Act has revamped the application process for EIDLs, reducing the qualifications needed and providing businesses with up-front, forgivable crisis loans of $10,000 to stave off desperation while larger loans are pending.
According to the U.S. Treasury, those smaller checks should be issued by the SBA within just three days while the department assesses their eligibility for more funds.
Unfortunately for most small businesses, that hasn’t been the case.
Few have had emergency loans processed that quickly, and many have been waiting weeks without assurances that they will receive any funding, according to a Wednesday report from The Washington Post.
That’s because demand for loans has ballooned in recent weeks as businesses become increasingly stretched. The lifeline extended to them by the federal government is quickly fraying, and without a re-up on funds, it could snap.
The EIDL program may already be out of money, ABC News reported Tuesday, overwhelmed with applicants within the first two weeks.
As of last Friday, the SBA said the program had racked up nearly four million small business loan applications, requesting a total of $383 billion in funding. Congress had only added $17 billion to the EIDL coffers with the passage of the CARES Act.
What’s more, businesses looking to PPP loans to keep operations afloat may be facing their own set of challenges.
According to the SBA, nearly half of all Americans in the private sector are employed by small businesses—many of which have been forced to close due to the pandemic. The PPP program was designed to keep them from furloughing their staff while the crisis looms, but its implementation hasn’t been smooth sailing.
Upon the passage of the CARES Act, the U.S. Treasury told businesses they could work with banks to obtain the loans. But according to ABC News, many major banking institutions didn’t even have their loan applications live by the program’s start date of April 3.
According to the outlet, Bank of America began taking applications earlier than its competitors, but prioritized its existing customers who already had loans. Many business owners were effectively barred from applying because they didn’t have established relationships with participating lenders.
Now, as more banks have solidified their application strategies and those restrictions have lifted, banks have become bogged down with requests. As of Tuesday morning, 1.08 million applications totaling $253 billion in loans had been approved, according to the SBA.
Rampant reports suggest the PPP could run out of funding by end of day on Wednesday.
A war has been raging in Congress over how to re-fund the PPP, with lawmakers at a stalemate over how much money to pour into the program, and how to allocate it.
Reports circulated last week that an additional $250 billion could be added to the pot, and while it looked as if Democrats and Republicans might reach a consensus over the weekend, Monday rolled around with no deal in sight.
Democrats want to add additional safeguards and stipulations to the measure, according to Newsweek, that would ensure the relief funding’s fair distribution. They want a portion of the money to be reserved for community banks, for ethnically diverse business owners, and for those without prior relationships with banks.
They also want to add $100 billion to the measure for hospitals and local medical facilities, $150 billion for state and local governments, and a 15 percent increase in benefits for food stamps.
Meanwhile, Republicans are pushing for a more rudimentary increase in funding for the existing measures of the PPP, bringing the total amount from $349 billion to $600 billion.
On Wednesday, House Speaker Nancy Pelosi (D-Calif.) addressed reports that PPP funding has all but dried up.
In a statement on her website, she wrote, “Democrats know that in order for the Paycheck Protection Program to succeed, it must work for everyone.”
Reiterating her party’s concerns about underbanked businesses and others struggling to access loans, as well as the dire state of local governments and hospitals, Pelosi wrote, “As has been clear since last week, Republicans’ bill which fails to address these critical issues cannot get unanimous consent in the House.”
Despite the program’s struggles to get funding to small businesses, President Trump remains optimistic about re-opening the country quickly, and assembled the Great American Economic Revival Industry Groups this week to dialogue with business leaders about what’s needed to get Americans back to work.
National Retail Federation president and CEO Matthew Shay, a member of the newly formed council, described retailers as toiling “on the front line and fully engaged in their communities in this war against coronavirus.” Maintaining the health and wellness of associates, customers and communities “is their number one priority,” he added.
“Almost every sector in the economy has been greatly impacted by this crisis, and retail is at the top of that list,” Shay said, noting that the sector drives “52 million American jobs, many of which have been impacted or are at continued risk while businesses stay closed.” An estimated 6.1 million retail jobs alone could be lost in just the first 120 days of the COVID-19 crisis, he added.
The council, Shay continued, assembles “some of the most successful business leaders in the world to gather their perspective on how businesses and consumers are being impacted by this pandemic.
“We will work together to ensure these issues are addressed and to determine a sensible and safe path forward for getting the country back to business,” he said.
“When the health conditions are right for reopening, our members will be ready to provide service to customers with effective safeguards and protocols in place,” Shay said.