With about 40% of the funds allocated by Congress in December, lawmakers approved another $ 7 billion for the fund in the $ 1.9 billion Covid bill signed last week. However, the additional funds are of little use if the March 31 deadline is not pushed back.
There is dual support for legislation that will extend the program until May 31 and provide an additional 30-day period for the small business administration to process applications that are still pending. A House bill could already be voted on Tuesday night, but the Senate will still have to follow legislation.
There are several reasons why so much money is left. Demand has slowed as the economy slowly recovers, but lenders say a new fraud detection process has delayed thousands of applications for weeks. In addition, exclusive windows did not allow certain larger businesses to apply for certain periods during the eight weeks the program has been open since the beginning of this year.
Rule changes
Congress has made changes aimed at ensuring that businesses hardest hit have access to the money rather than the chain stores and restaurants that quickly got big loans when the program first opened last year.
When lawmakers reopened access to the program in December, billions of dollars were cut out for community development financial institutions, which are usually lent to minority businesses in inferior communities, and for businesses with fewer than ten employees.
The government in Biden made even more sudden changes in February. With three days notice, it allowed small businesses with less than 20 employees to have an exclusive two-week window to apply for the financing, which would block larger employers during that time. It also expanded the suitability. Self-employed people, sole proprietorships and independent contractors may now be eligible for more money, as well as business owners with crimes not related to fraud, those guilty of their federal student loans and some residents who do not have citizens.
But in some ways, the changes for the second round of lending also made constraints. Businesses should show at least a 25% drop in gross revenue in the first, second or third quarter of this year, compared to the same quarter in 2019. Those with more than 300 employees are excluded.
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 businesses, there are still issues with bug reports and preservatives and it is difficult to make a call or email to receive. lenders.
Who was helped
Last year, between April and August, the program approved 7.6 million loans worth more than $ 687 billion. Since reopening in January for new first-time applicants and second loans, about $ 2.4 million in loans totaling $ 165 billion have been made on March 7.
The loans are forgiven if the business spends at least 60% of the money on wage expenses, although business owners must apply for the cancellation. Nearly 3 million have yet to apply for forgiveness.
Businesses still struggling
Advocates and lenders for small businesses say the program provides important assistance to struggling businesses and calls on Congress to extend the deadline. According to Opportunity Insights, a Harvard-based research group that is following the recovery, the number of open small businesses in the United States has dropped by 32% since January 2020.
“The current timeline for access to the EMP program is too cut short and does not make sense given the state of economic recovery,” the National Federation of Independent Business wrote in a letter to lawmakers.
The group noted that a number of small businesses are still assessing their needs in light of the ever-changing circumstances. Some business owners believe that the loans only provide a stop-gap in what has now become a year-long pandemic. Each loan is only meant to cover expenses for a few months.
CNN’s Jeanne Sahadi reported.
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