One of the hallmarks of the $ 2.2 trillion federal coronavirus relief program is the Paycheck Protection Program, or PPP. This created a $ 349 billion pool of money that businesses could access to continue paying their employees, even if the business were closed and not generating revenue.
The program, limited to businesses with fewer than 500 employees, initially allocates the money in the form of low-interest loans channeled through banks, but part – and in many cases all – of the loan can be forgiven by the federal government. The remainder of the money that has not been returned is converted into an 18 month 1% loan repayable to the bank through which the request was made.
This program was to be a lifeline for small businesses, but as of Thursday morning the fund was depleted as Congress bickered over how to replenish the money – leaving many small businesses that never had the chance to reapply by seeking to leave their employees in the cold.
“I knew this was going to be a challenge,” said Todd Tucker, president of the Partnership for Economic Development. “For as fast as these programs were put in place, and I think they are good programs… I knew they would be nowhere near big enough to meet the demand.”
Peter A. Pequeno II, senior vice president and chief loan officer at Surrey Bank & Trust, said real small businesses – those with five or fewer companies – have never had a chance.
“They only gave the banks advice on Tuesday afternoon,” he said, explaining that this meant business owners of this size weren’t able to apply until then. He said 67% of the money had already gone with many online businesses to take the rest by the time the federal government issued instructions on how these smaller businesses could apply.
Previously, large companies could still ask for money.
Pequeno said his bank had helped guide local businesses through the process, with 252 of their loan applications, asking for just over $ 45.1 million, approved.
“Almost all of this will be done in our community,” he said.
Pequeno said the key to his bank’s success starts early – even before the program was up and running. The PPP program is administered, at least in part, by the Small Business Administration (SBA). Pequeno said Surrey Bank & Trust got its applicants to complete their application files early, lining them up on the SBA portal for approval “before the government releases them to the big banks”.
“We used all of our resources, all of our loan officers worked all weekend, until Easter weekend, to help our community.”
That Friday, he said, when applications were due to open, the bank had its people on site in the building at 5:30 a.m., ready to start at 6 a.m., with most of the work done in the first three days, when 185 of their clients were approved for $ 40.8 million.
“We’re just very, very grateful to all of our customers, the community members, they also worked really hard. It was a team effort. If our clients hadn’t worked hard, many would have missed out. “
Essentially, Pequeno said the way the program works is that businesses apply for the loan, and if approved, they receive funding to pay their staff for up to eight weeks after the loan closes, even though the loan closes. business is closed due to a stay-home orders or other COVID-19 issues. The money must be used before June 30.
Somewhere along the line after the initial approval, the US Treasury Department will determine how much of each loan will be forgiven.
“We are not the judge on this matter. The Treasury decides on the amount forgiven. The Treasury approves the amount of the rebate. “
This canceled loan amount is repaid directly from the federal government to the bank. Any remaining balance on the loan turns into a 1% loan over 18 months, although the federal government still guarantees the loan in the event of default.
Pequeno said the PPP money officially ran out at 10:10 a.m. Thursday, when no more applications were accepted by the federal program. Even many applicants already online will not receive funding unless Congress allocates more money to the program.
This is where partisan politics seems to come into the fray.
While the two main parties played largely well in formulating the first three coronavirus stimulus packages, the next round is mired in party feuds.
According to multiple media outlets, Treasury Secretary Steven Mnuchin and others have pledged to invest more money in the plan, but Republicans and Democrats cannot agree on the amount or other favorite causes of the plan. silver.
According to The Hill publication, Senate Majority Leader Mitch McConnell, a Republican from Kentucky, last week attempted to pass a bill adding an additional $ 250 billion to the plan.
Democrats blocked the move, then hit back with a similar proposal that added $ 100 billion for hospitals and $ 150 billion for state and local governments to use to boost food aid. McConnell blocked this proposal.
And now, business owners who can’t pay their employees on leave are waiting, with both sides digging their heels and blaming the other guys.