The multi-billion-dollar federal programs intended to assist small businesses during the coronavirus crisis are seeing massive demand for loans and grants, but problems with funding and execution are severely hampering their effectiveness.
The largest, the $350 billion Paycheck Protection Program, is expected to run out of available funds by the end of the day, the Wall Street Journal reported Wednesday. About 1.3 million applications for loans worth more than $289 billion had been approved by Wednesday morning, the Journal said.
Lawmakers are feuding over the best way to provide a $250 billion boost for the program, with Republicans calling for a simple bill to provide the increase and Democrats pushing for a more complicated package that includes new regulations as well as additional assistance for other groups, including hospitals and state and local governments.
As lawmakers battle over replenishing the PPP – which, it should be noted, has paid out far less in loans and grants than it has approved – another program aimed at small businesses is running into difficulties of its own. The Economic Injury Disaster Loan program, designed to get cash quickly into the hands of small business owners who have been hurt by natural disasters, received a $10 billion boost in the $2 trillion relief package that became law in late March. In addition to loans, the EIDL program is offering small business owners grants of up to $10,000 that were supposed to arrive within three days. But it has has been plagued by delays and a lack of readily available funds, CNBC reported Wednesday, leaving many applicants high and dry weeks after receiving approval.
Like the PPP, the EIDL program is overseen by the Small Business Administration, which has struggled to keep up with the demand from desperate entrepreneurs. The average loan request has been about $200,000, but the agency has set a maximum of $15,000 due to the size of the demand and the limited funding. The total available for loans is about $7.3 billion, CNBC said, but demand is in the range of $372 billion – a massive differential.
“Sadly, the disaster loan program is a complete disaster,” Holly Wade, director of research and policy analysis at the National Federation of Independent Business, told The Washington Post.
Time to hurry: A survey published Tuesday by Main Street America points to the size of the problem the small business aid programs are dealing with. If current business conditions persist for the next two months, about 3.5 million small businesses could close permanently, the survey found. And if the recession lasts five months, roughly 7.5 million small businesses could shut their doors for good.