Small business bailout loans exceed $ 296 billion, quickly approaching program funding limit
Much-needed help for small businesses is starting to spill out, and more is expected in the coming weeks, as banks begin to deliver bailout funds to Main Street. But the first-come, first-served payroll protection program, worth $ 349 billion in aid, could approach the limit on loan commitments, with more than 1.3 million loans approved worth of more than $ 296 billion through Wednesday afternoon, according to the Small Business Administration.
The program could reach its funding limit by the end of Wendnesday, according to a source familiar with the matter.
The SBA and the Treasury Department have yet to release formal statistics on total loan disbursements from banks to small business owners, with a senior administration official telling CNBC the information was not yet available, despite multiple requests. SBA released data showing that the average loan amount is slightly less than $ 240,000.
Business owners who have received loan approval numbers should start raising funds quickly, as Treasury guidelines state that “the lender must make the first disbursement of the loan no later than ten calendar days from the date of the loan. loan approval date “.
Several large banks reporting profits this week offered a snapshot of the amount of loans made, with Wells fargo claiming to have received 370,000 indications of interest from customers until April 10. JPMorgan Chase, as of April 14, 300,000 applications at various stages for $ 37 billion in loans, of which $ 9.3 billion is already in the hands of small business owners.
Small businesses like Other Half Brewing, a craft brewery based in Brooklyn and Rochester, NY, just had their loan funded by Chase. CFO David Burman said the company had had to lay off about a quarter of its staff with fewer than 100 employees and transferred other frontline workers to new positions, whether for delivering beer orders or for design work. The loan will help bring workers back so the business is ready to reopen, once it can do so safely.
“It’s a great program to keep our business afloat,” says Burman. “It’s having what it takes to hire and keep employees, especially as our cash flow has changed and we’re dealing with longer-term accounts and suppliers.”
Beyond PPP loans, the CARES Act includes another important provision for small businesses that currently hold non-disaster loans through the SBA: the Small Business Debt Relief Program. This program provides six months of payment relief on existing 7 (a) and 504 loans to approximately 320,000 small businesses. This also includes business owners applying for new 504 or 7 (a) non-P3 loans.
“These are some of our most vulnerable small businesses. Because you know, if they got an SBA loan, they probably had a hard time getting a traditional bank loan,” said Sen. Chris Coons (D- DE), Member of the Senate for Small Businesses. & Entrepreneurship Committee says. “So these are exactly the companies that we want to make sure that for the next six months they have nothing to do with.”
Senator Coons said he is working with SBA administrator Jovita Carranza to make sure these affected small businesses are aware of the loan relief they have. A senior administration official said outreach to lending partners, stakeholders, borrowers and more is underway through electronic communications, and further guidance will be provided later this week.
“Given the severity and severity of our economic decline right now, I really hope that [the SBA] will go as fast as possible to provide advice, ”Coons says.
Treasury Secretary Steven Mnuchin has pledged to replenish the program to the tune of an additional $ 250 billion, but Congress has yet to agree to the terms of the new funding. Senate Democrats blocked an effort to pass additional funding Last week.
Another option for Main Street businesses in need of assistance is the Economic Disaster Loan Program, which offers disaster assistance loans of up to $ 2 million. Small business owners ask the SBA directly for help, but there were delays.
In the past, borrowers were told that they could also access up to $ 10,000 as a cash advance within three days of a successful application to the program. The guidelines have since changed, with companies now being told that funds will be distributed “within days” and that assistance will be limited to $ 1,000 per employee up to $ 10,000.
A senior administration official said the funds were being distributed and that nearly four million companies had requested EIDL funding for a total of $ 383 billion, but Congress had failed. allocated only $ 17 billion for the program. The Senate and the House are aware of the funding needs, the official said.
In its letter to Congress and the SBA this week, the NFIB said research conducted on April 9 showed that no business owner interviewed by his group had received EIDL funding or grants, urging the SBA to distribute funds and ask for more help.
Jason Duff, founder of Small Nation, a community developer focused on revitalizing downtown Bellefontaine, Ohio, says his company just accessed its $ 160,000 PPP loan this week. to bring back the employees now. But he is still waiting for an EIDL grant and the full loan amount.
“The biggest win was getting our SBA (for PPP) approval number, after we got that the loan was funded in four days, and we’re extremely grateful to have that cash trail.” , said Duff. EIDL is “a very different situation. When we applied, we were told that up to $ 15,000 was going to show up in our account within three days. It’s been over two weeks at this point that these conversations have had. Most for most businesses, including mine, we haven’t seen that money show up. “