The small business rescue set up by Congress to avert massive layoffs is set to exhaust its $350 billion funding capacity, top lawmakers say, as Congress remained in a stalemate over how to allocate more money for the popular loan program.
In a joint statement Wednesday evening, Senate Majority Leader Mitch McConnell of Kentucky and House Minority Leader Kevin McCarthy of California said that funding for the so-called Paycheck Protection Program will be depleted "in a matter of hours." That would force the program to stop accepting applications for the government-backed loans, which can be forgiven if businesses agree to maintain their payrolls.
As of 9 p.m., the SBA reported that 1.5 million applications had been approved for more than $324 billion. In a message obtained by POLITICO, the agency began to warn banks Wednesday that lenders would no longer be able to load loan requests into the SBA's systems and that the agency would not accept applications for new lenders to participate in the program.
The program neared its limit after Republicans and Democrats failed to reach a deal on a $250 billion funding increase requested by the Trump administration. Senate Republicans have insisted on passing a bill focused on funding more loans. Democrats want to make changes to the program and approve more money for local governments and hospitals. Some on Capitol Hill believe the brinkmanship could continue until next week.
“We urge Congress to appropriate additional funds for the Paycheck Protection Program—a critical and overwhelmingly bipartisan program—at which point we will once again be able to process loan applications, issue loan numbers, and protect millions more paychecks," Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza said in a joint statement Wednesday evening.
The impasse over funding is the latest setback for the aid effort, which was just beginning to disburse money to struggling small businesses after a rocky April 3 launch.
The banking industry this week had just started to report that it was disbursing tens of billions to small businesses after receiving well over 1 million applications.
"Running out of money will be problematic for Main Street," Tioga State Bank President and CEO Robert Fisher said earlier Wednesday. "Many small businesses will be left holding their applications. We are trying to help as many businesses as possible, but we know the window is closing."
At the kickoff of the program, lenders at first lacked guidance from the Trump administration on how to process applications and then ran into severe technical obstacles with an unstable SBA system used to approve the loans. It took until last week for banks to get guidelines on the documentation needed to disburse funds to borrowers. Self-employed individuals were able to apply for the loans in a second wave starting Friday, but banks didn't have instructions on how to process their loans until this week.
"With the funding drying up, many if not the majority of sole proprietorships and independent contractors will not have the same access and opportunities as the first wave of those eligible to apply," Bank of the West Corporate President Cynthia Blankenship said.
Some banks planned to continue taking applications as Congress figured out a way to restart the program. Bank lobbyists urged the SBA and Treasury Department to release guidance on how lenders should keep processing loans in the interim.
To banks on the front lines of the program, it was becoming clear that even another $250 billion would not be enough to meet the huge appetite for the loans, with hundreds of thousands of applications still pending.
"We think at the end of the day we're going to need upwards of $1 trillion in order to satisfy the demand of America's small businesses," Consumer Bankers Association President and CEO Richard Hunt said Wednesday.
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April 16, 2020 at 04:48PM
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Small business loan funds nearly depleted with Congress deadlocked - POLITICO
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