Federal funding for loan programs meant to help small businesses cover operating costs has run out, and the program to help cover payroll costs is now gone as well.
The U.S. Small Business Administration will no longer be able offer Economic Injury Disaster Loans, according to a press release sent to the Herald Thursday morning. The $2 trillion CARES Act appropriated $376 billion to provide loans for small businesses to help cover operating costs during the pandemic. The Paycheck Protection Program, meant to cover payroll costs for eight weeks, is also out of funds, leaving businesses who have applied for relief in limbo.
“We're told that the EIDL is out of money because, if you go to their website, it says this fund has reached its limit. The other one is expected to run out today,” said Eric Giltner, senior area manager for the SBA, on Thursday, April 16.
The SBA has processed more than 14 years' worth of loans in less than 14 days. By law, it can’t give more loans once all the funding has been used -- unless that funding is replenished by Congress.
In fact, an additional $250 billion has been requested for the relief program, according to Sen. John Hoeven, R-N.D., in a statement released Thursday. Hoeven stressed the importance of additional funding to help small businesses and their employees weather the coronavirus pandemic.
“The Paycheck Protection Program is clearly providing important support for small businesses and their employees,” Hoeven said. “The PPP will help our economy to rebound more quickly once this public health emergency ends and Congress should agree to provide additional funding for this vital program now.”
Hoeven isn't the only one asking to replenish the loan programs. U.S. Treasury Secretary Steven T. Mnuchin and U.S. Small Business Administration Administrator Jovita Carranza, stated in the SBA release, the high demand for the programs underscore the need for speedy, additional relief.
“We urge Congress to appropriate additional funds for the Paycheck Protection Program — a critical and overwhelmingly bipartisan program — at which point we will once again be able to process loan applications, issue loan numbers and protect millions more paychecks,” Mnuchin and Carranza relayed in the release.
The SBA is advising businesses who have pending PPP applications to sit tight for now. Companies who want to apply for the program are advised to stay in touch with their lenders and hang on to the relevant paperwork should Congress add additional funding. SBA Region VIII Administrator Dan Nordberg said he is hopeful funding will be available "in the near future."
Unlike EIDL loans, which are taken out directly through the SBA, PPP loans are taken out from a business's local lender, in what Nordberg calls an "unprecedented partnership." The loans are backed by the government and are considered forgivable if the borrower uses 75% of the loan for salaries. The remainder can be used for other business expenses.
A total of 1,661,397 PPP loans have been made by 4,975 lenders across the county. The number of SBA participating lenders more than doubled from a high of 1,800 prior to the PPP.