A $349 billion federal relief program for U.S. small businesses is expected to run out of money this afternoon, with many still waiting to get a lifeline, according to officials familiar with the situation.
The government-guaranteed loans are available on a first-come first-served basis. But without more funding, many small businesses that have flooded banks with applications won’t get help, advocates said.
As of early afternoon on Wednesday, the U.S. Small Business Administration reported there had been almost 1.4 million applications approved, totaling about $301 billion of the $349 billion set aside. That’s the value of loans the agency has approved for lenders to disburse, not money that has reached borrowers.
The program, which launched April 3, is running out of money after just 13 days.
An SBA spokeswoman didn’t immediately respond to a request for comment.
The Wall Street Journal reported earlier the program is set to run out of funds later Wednesday.
Republicans sought to approve an additional $250 billion for the program last week, but the effort stalled with Democrats also wanting changes to the program and more aid for state and local governments and hospitals. Senate Democratic leader Chuck Schumer and Treasury Secretary Steven Mnuchin talked Wednesday and a meeting has been set with staff in the first public sign of a possible break in the stalemate.
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The program, which was enacted last month as part of a $2.2 trillion relief package in response to the coronavirus pandemic, 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.
Trump administration officials had said that small businesses would get funding quickly, even the same day they applied, when the Paycheck Protection Program launched. But the initiative has been plagued with problems. Some borrowers couldn’t find banks to take their applications if they didn’t already have a lending relationship, and lenders couldn’t process loans because of vague guidance and a clunky SBA computer system that has been inaccessible for periods of time.
Data on how much money has actually been handed out to borrowers isn’t available, and some lenders report that disbursements are only slowly being made.
JPMorgan Chase & Co. said on Tuesday it has funded $9.3 billion in loans and has more than 300,000 businesses in the application process representing $37 billion in loans.
Republican Senator Marco Rubio of Florida, chairman of the Senate Committee on Small Business and Entrepreneurship, said more funding is critical.
“Loans will STOP if funds for guarantees are exhausted no matter how much/little has been disbursed,” Rubio said in an April 13 tweet. “That’s why we need funds ASAP.”
Small business advocates are concerned that money also could run out for a separate SBA relief program, the Economic Injury Disaster Loan initiative, which is offering loans and advances of as much as $10,000 as grants.
A lag in processing more loans now would be especially hard for small businesses struggling to survive the devastating impact of the pandemic, said Paul Merski of the Independent Community Bankers of America.
“The worst thing you could do is have desperate small businesses that have a loan application pending to tell them that, ‘Well, we’re going wait to decide what we want to do on additional funding,”’ Merski said.
Erik Bruun, owner of the SoCo Creamery, an ice cream shop and wholesale supplier in Great Barrington, Massachusetts, was one of the first to apply to the paycheck protection program at the end of March. He was told Monday his application had been approved, but he has yet to receive any funds.
“The idea that they’re going to run out of money is of course on my mind, because that just means another delay,” Bruun said. “It gets to the sense of hopelessness you feel when you don’t have certainty.”
— With assistance by Emma Kinery
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