A key piece of the federal government’s stimulus efforts to help small businesses and their employees has run out of money, shutting out thousands of potential borrowers who were seeking aid amidst the coronavirus-driven economic plunge.
The U.S. Small Business Administration said Thursday morning the Paycheck Protection Program wouldn’t be accepting any more applications for the $349 billion program. The agency reported approving more than 1.6 million Paycheck Protection Program loan applications totaling more than $339 billion from over 4,900 lending institutions.
While that money has been approved, most borrowers are still waiting for those loans to be funded — and for money to even show up in their accounts.
“America’s small businesses are on the brink, trying desperately to keep their doors open and support their employees,” said Brad Close, president of the National Federation of Independent Business, an advocacy group in Washington, D.C. “We’ve been hearing from our members, every day, worried the $349 billion lending program would run dry before help gets to them. Today, their worries became a reality.”
The Paycheck Protection Program loans have an ultra-low 1% interest rate, and the interest on the loans does not have to be paid for the first six months. The program is focused on helping businesses with 500 or fewer employees.
But the biggest draw of the Paycheck Protection Program, which launched nearly two weeks ago, is that borrowers that don’t lay off workers in the next eight weeks will have their loans forgiven — principal along with interest. That’s created a crushing demand for the loans, but also confusion as more than a million businesses scrambled to get them.
Despite the demand, some economists and small businesses owners say the PPP loans are a bad fit for what they currently need amid a pandemic that has forced them to shutter their doors.
Some business owners who applied early say they are still waiting for their money. One large bank said it still has tens of thousands of applicants waiting for their loans to be approved, even as the SBA announced the program was tapped out.
Monty Bennett, the CEO of hotel-chain operator Ashford Inc., worked with five staffers non-stop through the first weekend of the program to get his loan applications filed. Hotel operators have been particularly hard hit with forced shutdowns across the country and Bennett has had to either lay off or furlough most of his staffers.
Hotels chains are allowed to apply for PPP loans, but they must apply for each hotel property individually to remain under the SBA’s 500-worker cap for small business aid. Bennet said he was hoping to use the PPP money to rehire some of his staffers but only a handful of the 129 individual hotel applications he has completed have been approved.
He also reports that no money has showed up in his company’s accounts yet: “None funded. A small fraction approved,” Bennett said Thursday. “The whole thing has been extremely frustrating.”