Lawmakers are rushing to extend the federal government’s key relief program for small business owners as the deadline to apply for a loan from the Paycheck Protection Program approaches with more than $110 billion still untouched.
With about 40% of the funds allocated by Congress in December remaining, lawmakers approved another $7 billion for the fund in the $1.9 trillion Covid relief bill that was signed into law last week. But the additional funds are of little use if the March 31 deadline isn’t pushed back.
There’s bipartisan support for legislation that would extend the program to May 31 and provide an additional 30-day period for the Small Business Administration to process applications that are still pending. The House voted 415-3 to pass the bill Tuesday, but the Senate will still need to pass a companion piece of legislation.
There are several reasons that so much money remains. Demand has slowed as the economy slowly recovers, but lenders say a new fraud detection process has left thousands of applications in limbo for weeks. Plus, exclusivity windows blocked some bigger businesses from applying during certain periods over the eight weeks the program has been open since the start of this year.
Any loan that hasn’t been approved by the end of the month will not be funded under current rules. Bank of America has already stopped accepting new applications.
Rule changes
Congress has made changes intended to help make sure the hardest-hit businesses get access to the money rather than the chain stores and restaurants that quickly obtained big loans when the program first opened last year.
When lawmakers reopened access to the program in December, billions of dollars were carved out for community development financial institutions, which typically lend to minority-owned businesses in underserved communities, and for businesses with fewer than 10 employees.
The Biden administration made even more sudden changes in February. With three days notice, it allowed small businesses with fewer than 20 employees will have a two-week exclusive window to apply for the funding, blocking bigger employers during that time. It also expanded eligibility. The self-employed, sole proprietors and independent contractors can now qualify for more money, as well as business owners with non-fraud related felonies, those delinquent on their federal student loans and some non-citizen residents.
But in some ways, the changes for the second round of loans have also made eligibility more restrictive. Businesses must demonstrate at least a 25% drop in gross receipts in the first, second or third quarters of this year compared to the same quarter in 2019. Those who employ more than 300 workers are excluded.
There are still issues with error messages and holds and it is difficult to get a returned call or email, according to Hilda Kennedy, who spoke at a House hearing last week on behalf of the National Association of Development Companies, a trade group representing small business lenders.
Who’s been helped
Last year, the program approved 7.6 million loans worth more than $687 billion between April and August. Since it reopened in January for new first-time applicants and for second loans, about 2.4 million loans have been made totaling nearly $165 billion, as of March 7.
The loans are forgiven if the business spends at least 60% of the money on payroll expenses — though business owners have to apply for the cancellation. Nearly 3 million still have yet to submit a forgiveness application.
Businesses are still struggling
Small business advocates and lenders say the program is providing vital help to struggling businesses and are calling on Congress to extend the deadline. The number of open small businesses in the United States is still down 32% since January 2020, according to Opportunity Insights, a Harvard based research group tracking the recovery.
“The current time line for access to the PPP program is too truncated and does not make sense given the state of economic recovery,” wrote the National Federation of Independent Businesses in a letter to lawmakers.
The group noted that a number of small businesses still assessing their needs in light of ever-changing circumstances. Some business owners say the loans have only provided a stop-gap in what has now become a year-long pandemic. Each loan is only meant to cover a few months’ worth of expenses.
This story has been updated to note that the House has passed legislation to extend the program.
