Small business relief fund is ‘out of cash’ and no deal is in the table to refill it

The paycheck protection program has exhausted its cash and can no longer dole out grants to help stop small businesses from shuttering and keeping their employees on the payroll in the midst of the coronavirus crisis.

‘The Small Business Administration and the Department of the Treasury report that the Paycheck Protection Program will exhaust its funding in a matter of hours,’ Senate Majority Leader Mitch McConnell and House Minority Leader Kevin McCarthy wrote in a joint statement Wednesday night.

The $350 billion program will stop accepting applications from small businesses struggling to pay their rent or employees as all non-essential businesses were forced to close as different states implemented lockdowns and stay-at-home orders.

‘Democrats have spent days blocking emergency funding for Americans’ paychecks and now the bipartisan program has run dry,’ the Republican leaders said in the statement.

McConnell proposed an interim relief measure last week that would allocate $250 billion more to the payment protection program (PPP) to save small businesses.

But Democrats would not let the measure pass in the senate when the Majority Leader requested unanimous consent.

The payment protection program meant to provide economic relief in the form of a grant to small businesses is ‘out of cash’ just two weeks after applications opened 

Senate Majority Leader Mitch McConnell (left) and House Minority Leader Kevin McCarthy (right) said in a joint statement: ‘Democrats have spent days blocking emergency funding for Americans’ paychecks and now the bipartisan program has run dry’ 

Democrats were able to block a GOP-proposed $250 billion increase in the program. House Speaker Nancy Pelosi said the interim measure should not be passed without providing other reliefs for Americans, like expanding the food stamps program and hiking up the production of personal protective equipment

The program is meant to give small businesses the funds to keep employees on the payroll as unemployment levels surged to an all-time-high with more than 16 million people filing for the benefits in the last three weeks

They claim the interim relief needed to include some of their demanded measures, including more money for the federal food stamp program and an increased fund to ramp up the production and distribution of personal protective equipment (PPE) to hospitals and other healthcare centers.

The $10 million loans for small businesses would be forgiven by the government if the owners used the money to prevent laying off employees and keeping them on the payroll.

The PPP’s aim is to save several small businesses from shuttering and keep thousands of employees from filing for unemployment as the number of claims reached an all-time-high when more than 16 million people applied for the benefits in the last three weekly filing periods.

The federal government lending program, included as part of the CARES Act passed last month, is nearing its $349 billion statutory limit less than two weeks after it started accepting applications.

The Small Business Administration said as of Wednesday afternoon, it had approved nearly 1.38 million loans totaling more than $301 billion – up more than $50 billion since Monday.

The Trump administration has asked Congress, which set the original ceiling, for another $250 billion for the program. However, that request has stalled in the Senate. 

An email sent to the SBA for information about the agency’s next steps after the lending limit is reached was not immediately answered.

It’s unclear how much money has actually been distributed from the program, which only launched April 3. Thousands of business owners are still awaiting word on their loan applications.

The average loan size is $240,000, according to the SBA.

The federal government announced Wednesday that it would run out of money for the program within hours

President Donald Trump is flanked by Small Business Administration (SBA) Administrator Jovita Carranza (left) and Treasury Secretary Steven Mnuchin (right) as he departs the Roosevelt Room following a ‘small business relief update’ video conference call event with banking executives

However neither the Treasury Department nor the agency overseeing the lending program have put out detailed information about the taxpayer-backed loans, which are administered by banks.

An administration official told CNBC the information is not available. 

The loan money is contained in a $2 trillion coronavirus bailout law. When it was announced late last month, SBA administrator Jovita Carranza said in a statement: ‘Speed is the operative word; applications for the emergency capital can begin as early as this week, with lenders using their own systems and processes to make these loans.’

Having banks dole out the money was designed to get the funds out to businesses as quickly as possible.

The loans are to be completely forgiven, so long as proceeds are used to cover payroll, mortgage interest, rent, and utilities for the two months after the loan is made, according to Treasury Department guidance, and compensation levels are maintained. 

Businesses getting the loans range from health care to retail to construction. 

House Speaker Nancy Pelosi responded to reports that the program could run out of funds today. Democrats are negotiating with the administration on a deal to provide $251 billion in new funding for small businesses.

‘Democrats know that in order for the Paycheck Protection Program to succeed, it must work for everyone. That is why we have been asking for the Administration to work with us to help’ small businesses that are ‘underbanked,’ state and local governments that are ‘desperate,’ and front line hospitals, she wrote.

‘As has been clear since last week, Republicans’ bill which fails to address these critical issues cannot get unanimous consent in the House,’ she said, a week after refusing to go along with a stand-alone bill being sought by Republicans. Democrats want a broader deal worth $500 billion dealing with all three areas.

 

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